EU creator Jean Monnet was Roosevelt's eyes and ears in Europe. Some called him a US agent
Brexiteers should have been prepared for the shattering intervention of the US. The European Union always was an American project.

It was Washington that drove European integration in the late 1940s, and funded it covertly under the Truman, Eisenhower, Kennedy, Johnson, and Nixon administrations.

US President Barack Obama warned Britain to stay in the EU
US President Barack Obama warned Britain to stay in the EU CREDIT: AFP/GETTY
While irritated at times, the US has relied on the EU ever since as the anchor to American regional interests alongside NATO.

There has never been a divide-and-rule strategy.

The eurosceptic camp has been strangely blind to this, somehow supposing that powerful forces across the Atlantic are egging on British secession, and will hail them as liberators.

The anti-Brussels movement in France - and to a lesser extent in Italy and Germany, and among the Nordic Left - works from the opposite premise, that the EU is essentially an instrument of Anglo-Saxon power and 'capitalisme sauvage'.

France's Marine Le Pen is trenchantly anti-American. She rails against dollar supremacy. Her Front National relies on funding from Russian banks linked to Vladimir Putin.

Like it or not, this is at least is strategically coherent.

The Schuman Declaration that set the tone of Franco-German reconciliation - and would lead by stages to the European Community - was cooked up by the US Secretary of State Dean Acheson at a meeting in Foggy Bottom. "It all began in Washington," said Robert Schuman's chief of staff.

It was the Truman administration that browbeat the French to reach a modus vivendi with Germany in the early post-War years, even threatening to cut off US Marshall aid at a furious meeting with recalcitrant French leaders they resisted in September 1950.

Soviet tanks rumble into Prague
Soviet tanks rumble into Prague
Truman's motive was obvious. The Yalta settlement with the Soviet Union was breaking down. He wanted a united front to deter the Kremlin from further aggrandizement after Stalin gobbled up Czechoslovakia, doubly so after Communist North Korea crossed the 38th Parallel and invaded the South.

For British eurosceptics, Jean Monnet looms large in the federalist pantheon, the emminence grise of supranational villainy. Few are aware that he spent much of his life in America, and served as war-time eyes and ears of Franklin Roosevelt.

General Charles de Gaulle thought him an American agent, as indeed he was in a loose sense. Eric Roussel's biography of Monnet reveals how he worked hand in glove with successive administrations.

General Charles de Gaulle was always deeply suspicious of American motives
General Charles de Gaulle was always deeply suspicious of American motives CREDIT: ALAMY
It is odd that this magisterial 1000-page study has never been translated into English since it is the best work ever written about the origins of the EU.

Nor are many aware of declassified documents from the State Department archives showing that US intelligence funded the European movement secretly for decades, and worked aggressively behind the scenes to push Britain into the project.

As this newspaper first reported when the treasure became available, one memorandum dated July 26, 1950, reveals a campaign to promote a full-fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the Central Inteligence Agency.

The key CIA front was the American Committee for a United Europe (ACUE), chaired by Donovan. Another document shows that it provided 53.5 per cent of the European movement's funds in 1958. The board included Walter Bedell Smith and Allen Dulles, CIA directors in the Fifties, and a caste of ex-OSS officials who moved in and out of the CIA.

OSS
Bill Donovan, legendary head of the war-time OSS, was later in charge of orchestrating the EU project

Papers show that it treated some of the EU's 'founding fathers' as hired hands, and actively prevented them finding alternative funding that would have broken reliance on Washington.

There is nothing particularly wicked about this. The US acted astutely in the context of the Cold War. The political reconstruction of Europe was a roaring success.

There were horrible misjudgments along the way, of course. A memo dated June 11, 1965, instructs the vice-president of the European Community to pursue monetary union by stealth, suppressing debate until the "adoption of such proposals would become virtually inescapable". This was too clever by half, as we can see today from debt-deflation traps and mass unemployment across southern Europe.

In a sense these papers are ancient history. What they show is that the American 'deep state' was in up to its neck. We can argue over whether Boris Johnson crossed a line last week by dredging up President Barack Obama's "part-Kenyan ancestry", but the cardinal error was to suppose that Mr Obama's trade threat had anything to do with the ordeals of his grandfather in a Mau Mau prison camp. It was American foreign policy boilerplate.

As it happens, Mr Obama might understandably feel rancour after the abuses that have come to light lately from the Mau Mau repression. It was a shameful breakdown of colonial police discipline, to the disgust of veteran officials who served in other parts of Africa. But the message from his extraordinary book - 'Dreams From My Father' - is that he strives to rise above historic grudges.

Brexiteers take comfort that Republican hopeful Ted Cruz wants a post-Brexit Britain to jump to the "front of the line for a free trade deal”, but he is merely making campaign hay. Mr Cruz will conform to Washington's Palmerstonian imperatives - whatever they may be at that moment - if he ever enters the White House.

Kenya
President Obama's grandfather was a prisoner during the suppression of Kenya's Mau Mau revolt, a shameful episode of British colonial history

It is true that America had second thoughts about the EU once the ideological fanatics gained ascendancy in the late 1980s, recasting the union as a rival superpower with ambitions to challenge and surpass the US.

John Kornblum, the State Department's chief of European affairs in the 1990s, says it was a nightmare trying deal with Brussels. "I ended up totally frustrated. In the areas of military, security and defence, it is totally dysfunctional."

Mr Kornblum argues that the EU "left NATO psychologically" when it tried to set up its own military command structure, and did so with its usual posturing and incompetence. "Both Britain and the West would be in much better shape if Britain was not in the EU," he said.

This is interesting but it is a minority view in US policy circles. The frustration passed when Poland and the first wave of East European states joined the EU in 2004, bringing in a troupe of Atlanticist governments.

We know it is hardly a love-affair. A top US official was caught two years ago on a telephone intercept dismissing Brussels during the Ukraine crisis with the lapidary words, "* the EU".

Yet the all-pervading view is that the Western liberal order is under triple assault, and the EU must be propped, much as Britain and France propped up the tottering Ottoman Empire in the 19th - and wisely so given that its slow collapse led directly to the First World War.

Today's combined threats comes from Jihadi terror and a string of failed states across the Maghreb and the Levant; from a highly-militarized pariah regime in Moscow that will soon run out of money but has a window of opportunity before Europe rearms; and from an extremely dangerous crisis in the South China Sea that is escalating by the day as Beijing tests the US alliance structure.

The dangers from Russia and China are of course interlinked. It is likely - pessimists say certain - that Vladimir Putin would seize on a serious blow-up on Pacific rim to try his luck in Europe. In the eyes of Washington, Ottawa, Canberra, and those capitals around the world that broadly view Pax Americana as a plus, this is not the time for Britain to lob a stick of dynamite into Europe's rickety edifice.

The awful truth for the Leave campaign is that the governing establishment of the entire Western world views Brexit as strategic vandalism. Whether fair or not, Brexiteers must answer this reproach. A few such as Lord Owen grasp the scale of the problem. Most seemed blithely unaware until Mr Obama blew into town last week.

In my view, the Brexit camp should be laying out plans to increase UK defence spending by half to 3pc of GDP, pledging to propel Britain into the lead as the undisputed military power of Europe. They should aim to bind this country closer to France in an even more intimate security alliance. These sorts of moves would at least spike one of Project Fear's biggest guns.

The Brexiteers should squelch any suggestion that EU withdrawal means resiling from global responsibility, or tearing up the European Convention (that British-drafted, non-EU, Magna Carta of freedom), or turning our backs on the COP21 climate accords, or any other of the febrile flirtations of the movement.

It is perhaps too much to expect a coherent plan from a disparate group, thrown together artificially by events. Yet many of us who are sympathetic to the Brexit camp, who also want to take back our sovereign self-government and escape the bogus and usurped supremacy of the European Court of Justice, have yet to hear how Brexiteers think this extraction can occur without colossal collateral damage and in a manner consistent with the honour of this country.

I love Marmite: when I lived in France, we would always make sure that whichever family member was travelling back would make sure to pack a few pots in their bags.

So the fact that Unilever, which owns the spread, has been trying to hike its price is bad news for me and my family.

The fact that its stand-off with Tesco is now over changes little.

But nobody should ever confuse their own immediate self-interest with the good of the nation.

Before I take a closer look at the economics of Marmite, one simple point is crystal-clear.

If, like me, you believe that the pound has been too high for too long and needed to fall to help rebalance the economy, then you must also want the price of imports to rise relative to the price of domestically produced goods.

The whole point of hoping for a lower sterling is that it encourages consumers, at the margin, to switch to cheapened domestic products.

This is temporarily bad for consumers: imports are great.

But we cannot afford as many, and will have to become more productive to fix that.

The UK’s current account deficit is the largest of the G7: we don’t export enough and don’t make enough money on our overseas investments, and are therefore obliged to hand over assets – central London offices or companies – to pay for our imports.

Current account balance (as a % of GDP)
The UK's current account deficit is larger than any othermajor advanced economy
Source: OECD
UK
US
France
Italy
Canada
Japan
Germany
-10
-5
0
5
10
Highcharts.com
I consume lots of imported goods myself, and went on a foreign holiday: the lower pound was painful, but I have no right to complain, and I didn’t.

The UK has been living beyond its means these past few years; we thought the value of our output was higher than it was and the markets, bizarrely, indulged us.

Brexit is the catalyst, not the real root cause, of this return to reality. A lower pound will only work if it slashes the current account deficit.

Ideally, I would like it also to help us consume a little less overall and save a little more.

Sterling is down 21pc on a trade-weighted basis since it peaked last November, Berenberg calculates; it is down 16pc since the referendum. By contrast, trade-weighted sterling slumped almost 30pc in 2007-08 and by close to 20pc in 1992 when we thankfully left the preposterous European Exchange Rate Mechanism.

The current slide will boost our current account: the fact that we manufacture less as a share of GDP today compared with 1992 doesn’t really matter.

It is also a myth to believe that tradeable services are not price-sensitive. Back to Marmite, which is a much more complex story than first meets the eye.

It is not actually an import, so very little of the above applies to the row with Tesco, which ended last night. Marmite is made in the UK, using largely UK inputs and UK workers; its factory already exists so it doesn’t need to buy new machinery for it from abroad.

Of course, it also imports some raw materials, including for the packaging; and some commodity markets are priced in dollars, so there will be cost pressure there (though scope for negotiation). Modern supply-chains are complex, but there is no way that Unilever’s real costs for Marmite and other products have risen by 10pc, the original amount by which the company wanted to hike its prices.

Companies should have the right to price their products in any way they like within the law.

Tesco pulls famous brands in Brexit price rowPlay! 01:27
If Unilever wants to hike Marmite’s price by 300pc, and the retailers agree to stock it, so be it; we as consumers have the right to switch to cheaper supermarket own labels or to Vegemite (yuck and yuck again).

But companies should always be open about their decisions: the primary reason for the proposed price hikes was that Unilever’s accounts are in euros.

Sterling’s slump has slashed its revenues and profits for the purpose of its accounts. The company believes that it has pricing power, and was trying to recoup some of this; Tesco fought back, in a typical supplier-retailer stand-off.

These sorts of things are perfectly legitimate and happen all the time.

Yet Unilever has a long history of supporting pro-EU causes, and meddling in democratic politics, so its attempt at hiking its prices has infuriated an important section of the population who are now convinced that they are being “punished” for their referendum choice.

A pro-Brexit mass membership pressure group could well emerge, perhaps out of the Leave.EU campaign, and engage in cultural warfare against companies it doesn’t like.

Left-wing groups have hammered energy firms in this way for years; it could soon be the turn of the Right to do the same.

Unilever and its ilk need to tread much more carefully: the political scene has changed forever.

Tesco, by contrast, is playing a clever PR hand: it has turned itself into a neutral advocate of consumer interests – a campaigner for lower prices.

This is an astonishing transformation by Dave Lewis, who has slowly been rescuing Tesco.

He cleverly didn’t take sides on Brexit: he realised that a company that employs so many people and serves so many consumers needs to stick to commerce.

A Unilever veteran, he knew where that company produced its goods, the real impact of the slumping pound and what its margins are (much higher, in fact, than Tesco’s).

The showdown with Unilever was a masterstroke, as was its prompt resolution: I still remember when a decade ago, long before banker-bashing had even been invented, Tesco was the most demonised company in Britain, viewed as too nasty towards suppliers.

The poll's findings suggest that most Scots do not want another referendum on independence despite the EU vote
(Photo: Getty) Chris Green 0:01 Saturday July 30th 2016
A clear majority of Scots want the country to stay part of a post-Brexit UK rather than becoming independent and remaining part of the EU, an opinion poll has found. The results of the survey, carried out a month after the result of the European referendum, calls into question Scotland’s appetite for a re-run of 2014’s vote on independence. “The arguments for Scotland remaining a part of the UK are just as compelling as they were in 2014 – in or out of the EU” Lord Dunlop The YouGov poll found that 46 per cent of Scots would prefer to remain part of a post-Brexit UK, while only 37 per cent favoured of breaking up the Union and being allowed to remain in the EU. The results will be seen as a blow to the SNP’s hopes of securing independence for Scotland following the UK’s decision to leave the EU last month, which came despite 62 per cent of Scots voting to remain.
IndyRef2? Nicola Sturgeon, the SNP leader, warned in the aftermath of the result that a second referendum on Scottish independence was now “highly likely” as voters would be furious at the prospect of being dragged out of the EU against their will. The survey also found that the result of the EU vote has not had much of an impact on people’s opinions on independence, with a majority of people continuing to favour remaining part of the UK. Only 47 per cent said they want Scotland to become an independent country, while 53 per cent want to keep the Union intact, the poll of more than 1,000 Scottish adults found. The survey also showed that more Scots would rather be part of a post-Brexit UK with no access to the EU’s single market than leave the Union to secure continued free trade, with 40 per cent favouring the former scenario and only 34 per cent the latter. “Inevitably, some will suggest that the high-water mark of Scottish independence has now passed, especially as it was thought that leaving the EU might persuade No voters to change their minds and vote against the Union,” said Joe Twyman, YouGov’s head of political and social research. “However, the situation is, naturally, more complicated than that. There remains a great deal of uncertainty about what the UK’s relationship with the EU will look like…once precise details of Brexit are hammered out it could change the whole context of the independence debate.” ‘Divisive constitutional debate’ The Scottish Conservatives said the poll’s findings “completely exposes the SNP’s post-Brexit hyperbole” and called on Ms Sturgeon’s party to “get back to the day job, instead of agitating for yet another independence drive”. Scotland Office Minister Lord Dunlop added that another “divisive constitutional debate” was not want the country wanted. “The arguments for Scotland remaining a part of the UK are just as compelling as they were in 2014 – in or out of the EU,” he said. “The Prime Minister has been very clear that we are going to make a success of Brexit, and the focus now needs to be on collaborative working with the Scottish Government as ‘Team UK’ to ensure the best possible deal for Scotland and the rest of the UK.” However, the SNP pointed out that support for independence had risen since YouGov’s last poll on the subject, suggesting that No voters were reconsidering their views in light of the UK’s decision to leave the EU. “In light of the overwhelming vote to remain in the EU, it is right that the Scottish Government explores every option to protect our relationship with and place in the EU – including the option of another independence referendum if that is what it takes,” said SNP business convener Derek Mackay.

It's great that you can see into the minds of everyone in Scotland.
At this early stage it's guesswork.

Polls can be accurate or inaccurate so some folks can go round the media telling other people what to think.

For sure there are no guarantees we'd get another referendum, no guarantees we'd win, and no guarantees we'd lose.

Last time out, every trick in the book was used, and i do mean every trick in the book. This includes people who are dead, somehow being able to vote, the link up between various right wing factions, of the Orange Order etc. An orchestrated riot in George Square. An attempt to effectively bring terror to the streets of Glasgow.

Folk living in England being able to vote if your English simply because there is a holiday home up here, and guess who owns most of the land?

Scotland gets the Commonwealth Games a month before the vote, Rangers get put into liquidation by HMRC, after an attempted clamp down on Sectarian singing at football matches, brought in by the SNP.

What else, oh yeah everyone working in the public sector being told to vote to stay or lose there jobs.

Then obviously the media was extremely out of order.

Leave and you won't get into the EU....laughing at the prospect of Scotland taking up the Euro.

It's the media who pour all this out. Scotland wants to go in a different direction, equates to Scotland being beggars, thieves and vagabonds, only not worded so nicely.

So now we wait and see. The attack dogs are out already, all the usual suspects.

Let them say what they will, but the will of the Scottish people would have been a lot different if we didn't have every single press room on the planet trying to do the Tories a favor in exchange for life peerages and tax breaks.

Do you think it's any coincidence the first person Cameron went to thank was Bloomberg? Do you think it's any coincidence the Scottish Referendum was a data mining test, the kind of not seen in some time, or perfected in America?

Do you think a fair and unbiased media would have altered the vote?

We know all the usual tactics will be used to stoke the fires of hatred.

All the things that needed to be covered up, the enquiries were put on hold into Iraq, VIPaedo Ring etc.

We now also know an aeroplane that was blown up in the borders wasn't blown up by the Libyans, so guess what, we were lied to about that as well.

They wanted to get all this timelined so that it wouldn't affect the vote and now the alarm bells are ringing, because essentially we've got English votes for English laws, but we have English votes for Scottish laws.

Then after our referendum, we have one to leave the EU which contradicts what was being said about Indyref.

Contradictions abound you need to make up your mind on whether you dig the queen, the royal family, westminster, the City of London Corporation, white collar crime, the prime minister showing his hand via offshore trading scandals based around new government policies.

I could go on, but you know all these things. We are against the same things, just without the bigotry and propaganda.

The thing that spooks people are things like pensions being cut. Scotland stays in the UK, they get cut anyway.

Also the timing. It just simply does not fit with the pre-determined media timeline to affect the vote in any way shape or form. By that i mean they are not organized for it.

So look out for some stalling tactics to get the US one out of the way and all the autobots once again directed against Democracy.

Scotland might just get it and if they do i'll not be voting to stay in a fake union that suits one side more than the other.

I won't be voting so all the best jobs go down south and the talent also follows.

I don't want to be part of a Nuclear program when we have been developing renewable technology up here for a long time.

People will get into this thing that the financial district gets to decide if it's viable or not.

People rigging the oil price to stave of a mega collapse, turning around now and saying oh but what about the oil price dropping?

Coouldn't care less. We've shale in the North Sea, massive fishing grounds that can possibly be reversed and a lot of land that the queen liked to give away as presents to war heroes and war criminals.

So on the back of this, you can go tell Google or Facebook, my entire family will vote to stay and with a few years passing, the 150,000 votes to make up are sorted by the passing of the older generation and all the folks too young to vote, now being able to.

It's daft Tony, and it certainly brings into question whether you're desperate for a story or wish to actually do the groundwork yourself. Rather than push the Press TV narrative.

Pushing a poll as some form of reasoning, before people are thinking about Indyref, is about as ridiculous as the poll itself.

Just like the phrase, Leaving the UK. We wouldn't be leaving anywhere, but rather not be subjected to the unanimous English vote, which is always a vote for stupid.

Its a pleasure to be here in the United States, in Washington DC and of course here in this well respected organisation.

One of the things I’ve often been reminded of since I arrived, is the fact that the very bonds between Scotland and the USA go back centuries.

They run from the discussion and debate between enlightenment thinkers such as David Hume and Benjamin Franklin; to the modern exchange of university graduates and the connections between our technology companies. Our relationship is cultural, social, historic and economic. We value those things very highly. And from what I’ve seen on my visit, I’m sure that those ties will continue and strengthen for generations to come.

So it’s a pleasure to be here at the Council on Foreign Relations – an organization which for more than 90 years has contributed to that exchange of ideas between the USA and the wider world.

And I’m especially pleased to be speaking at this particular time. I’m very aware that there is a strong interest here in recent political developments, not just in Scotland but in UK as a whole - and in the implications of those developments for Europe and the wider international community.

Before we begin our discussion, therefore, I want to briefly provide my thoughts on where the UK and Scotland stand now.

And in doing that, I’ll talk about two referendums and one election. I shall look back at the referendum on Scottish independence last year, and the UK General Election last month; and I’ll also look forward - to the referendum on the United Kingdom’s membership of the European Union, which will take place sometime before the end of 2017 – although the exact time is yet to be determined.

Now, as you’ll probably all be aware, the first referendum - on Scottish independence in September –didn’t exactly turn out as I would have wanted! But while it may not have transformed Scotland's constitutional position, it did undoubtedly transform Scottish and had a transformational effect on UK politics as well.

Firstly it made Scotland one of the most politically engaged countries in the world. Nearly everyone became involved in a peaceful and passionate debate about the kind of country they wanted to live in. That has had lasting consequences.

For example in the UK General Election last month, turnout in Scotland was 5 percentage points higher than in the rest of the UK. Many people, who maybe hadn’t previously been interested in politics, understand that their vote and their voice really matter – they feel involved in decision-making in a way which hasn’t happened before.

And so regardless of the result, the referendum itself has been good for Scotland – we are more energised, informed and empowered than we have ever been before.

The result from that referendum also provided part of the context for last month’s UK General Election.

To the casual observer the UK election produced a very clear result, with the election of a majority Conservative government, and saw David Cameron remaining as Prime Minister.

But when you look in more detail, something striking and more complex emerges – in many ways there were four different elections last month in the different nations of the UK. Those elections had very different results and those results have significant implications for the UK and how its governed as a country.

The Scottish National Party won 56 seats out of the 59 in Scotland; Labour were clearly the biggest party in Wales; the Conservatives gained 60% of the seats in England; and Northern Ireland has always had a different system of party politics.

Shortly before the election I raised the question of what is an electoral mandate in the UK when the four nations are pulling in different directions. In practical terms simply winning enough votes and seats in England, can secure a Parliamentary majority. But when a government is achieved only by winning seats in one of the four nations of the UK - what kind of mandate is that?

The Conservative Party has the right to form the Government of the UK. But it was not the biggest party in three of the four nations of the UK – far from it - and so the legitimacy of its actions in those other nations comes very clearly into focus.

And so as I discussed with the Prime Minister when he came to see me after the election - what happens to the future of the UK in the years ahead will depend on how responsibly Westminster deals with that reality.

I'm not planning to refight the independence referendum on the immediate horizon - but if the UK is to remain intact it must adapt to multinational and multi-party politics in a far more substantial manner.

Here in the USA, you’re used to the idea of 50 different state governments making very different choices about very significant issues. But that’s not something the UK governments are used to – for much of the last century, it’s been a remarkably centralised state. And it’s now increasingly clear that for the UK as a whole, one size doesn’t fit all. And a one size fits all approach will not fit the bill for the future.

The distinct political identities which seem to be emerging in different parts of the UK, are also relevant to the third vote I want to talk about – the coming referendum on the UK’s membership of the European Union.

It’s also a matter of considerable interest here in the US too.

What I find odd about this referendum is that the Prime Minister says that he wants to stay in Europe; both of the biggest UK parties want to stay in Europe; there’s overwhelming support – or so it seems - for the EU in the Westminster parliament; and yet David Cameron has us standing perilously to the exit door to appease members of his own party. Many of them will not be happy with any renegotiation of the UK’s terms of membership, and will campaign for an “out” vote regardless.

The UK Government’s approach seems especially odd in Scotland. In last month’s general election, across the whole of the UK, parties which want to leave the European Union got more than 12% of the popular vote. In Scotland, the figure was less than 2%. Only this week, an opinion poll of Scottish voters has shown that 72 per cent would vote to remain in the EU, with only 28 per cent saying they would vote to leave.

This is not surprising given the economic significance of EU membership. In Scotland alone, 30,000 jobs relay on exports to the EU.

So a referendum simply isn’t a priority for most people in Scotland. But it is possible – depending on how the result goes across the UK – that Scotland could be forced out of the EU against our will.

That’s why the European question is in some ways directly linked to the question of how the UK is governed.

One of the things that Scotland was consistently told, in the two years leading up to the independence referendum, is that we are a valued and equal partner in a UK family of nations. And so surely it shouldn’t be possible for Scotland’s voice to be overruled in an EU referendum.

That is why the Scottish Government is arguing for a “double majority” provision in that referendum – where the UK can only leave the EU, if each nation of the UK votes to leave. That sort of territorial requirement is used in federal countries such as Canada or Australia. It’s time to apply it to the UK - which is a multinational state – to give meaning to the views that the UK is a family of nations.

I said last week, in a speech to the European Policy Centre in Brussels, that if Scotland were taken out of the EU against our will, the groundswell of opinion in Scotland could produce a clamour for another independence referendum which may well be unstoppable.

The UK Government can remove that possibility at a stroke by agreeing to the 'double majority' provision. The referendum legislation should demonstrate what we have so often been told – that the UK Government sees the UK as a family of nations.

It’s clear from what I’ve said that these are momentous and exciting times for Scotland and indeed for the UK as a whole. That brings challenges – of course – but it also brings considerable opportunities.

The coming months and years give us a chance to secure greater powers for Scotland - allowing us to build a powerhouse economy and ensure a more equal society; they provide an opportunity to secure better governance across the whole of the UK; and they will see a vote that I hope will reaffirm the place of Scotland and the UK within the European Union.

All of those outcomes are possible, but none of them are guaranteed. They require positive argument and constructive negotiation from political leaders across the UK.

I’m determined that the Scottish Government will take the lead in making those arguments and contributing to those negotiations. Because if we achieve those three objectives, it will be good for Scotland and indeed for every nation of the UK; it will secure our place in Europe and the wider world. By doing that will help us to strengthen our friendships and alliances - both here in the heart of Washington, and right across the world.

Quote:

Banksters will 'smash up' UK economy on 2017 Article 50 Brexit
Well that 'smash up' quote is just me actually but it's pretty accurate
More and more 'insiders' like Shell's Vince Cable and Tony Blair's Alasdair Campbell are saying this
When they trigger article 50, let them have it!

Sir Vince Cable challenged former Chancellor Gordon Brown over his economic policies and correctly predicted the economic crash Getty
The British economy “will turn nasty” and could fall into recession as a result of Brexit, former Business Secretary Sir Vince Cable has said.

Recent economic growth and reassurances over sterling value may have led Britain into a false sense of calm, but living standards are being cut and longer-term problems are imminent, he warned.

“The two ways that economics are going to turn nasty are because devaluation – which may well grow - cuts peoples incomes,” he told The Independent. “They’re paying more for their food and their petrol, and that’s going to hit people next year particularly.

“The second is that businesses have just stopped investing, and that feeds through into potential recession and stores up long-term problems.

“Part of the problem is that George Osborne went round with this ‘Armageddon’ that the world was going to collapse and it hasn’t. So people think there’s no problem but there is.”

Speaking ahead of his return to the further education sector, the former Business, Innovation and Skills Secretary called for a review of government spending in education in particular.

Working with the National Union of Students, he will lead a new research project, Students Shaping Further Education, into how major reforms to the sector will affect current and future students across the UK.

The review will consider all aspects of the industry, including funding cuts to apprenticeships – which he says could ultimately affect productivity and add a further blow the economy.

“One of the problems with Brexit is that it’s sucking the energy out of the Government,” he said. “The really big thing about the UK is productivity if we take our eyes off that that’s bad.”

“It is a little bit like the Peanuts cartoon, where he walks off the cliff but is still peddling furiously, and hasn’t actually dropped. The economy is a little bit like that at the moment.”

“The economy looks alright in sterling terms but if you translate it into dollar terms, it is a lot smaller than it was and people are not aware of that, and people are going to feel it in the next few years.”

In the years before the global economic crisis, Sir Vince warned openly of the dangerous market banks were creating with easy lending and challenged the then-Chancellor, Gordon Brown, on his policies.

In November 2003, he said: “Is not the brutal truth that the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level?”

Experts this week warned that sterling is likely to plunge to a new record low once procedures to leave the EU begin.

Sterling has already dropped by nearly 20 per cent against the dollar since the Brexit vote, becoming the world’s worst-performing currency in October.

Theresa May 'defies Brexit vote' and opts into new EU-wide security measures
Exclusive: Britain will agree to the automatic sharing of DNA samples, fingerprints and vehicle registration data, after months of uncertainty

Theresa May has risked the anger of hardline Brexit supporters by deciding to opt in to a series of EU-wide crime-fighting measures, The Independent can reveal.

Britain will agree to the automatic sharing of millions of DNA samples, fingerprints and vehicle registrations, to speed up the hunt for suspected terrorists and major criminals.

Parliament supported opting back into the so-called Prüm Convention last December – but ministers had refused to say if the decision would be derailed by the June decision to leave the EU.

Now Brandon Lewis, a Home Office minister, has revealed the Government will press ahead, in a letter sent to a Commons committee which is investigating the issue.

The decision will come as a relief to the police and security services, who have argued EU-wide co-operation is essential to catch foreign criminals and terrorists who commit offences in Britain.

Senior officers had spoken of their fear that having to renegotiate vital information sharing would take years, leaving dangerous gaps in intelligence in the meantime.

It will also raise their hopes that Britain will also remain a member of Europol – a decision that must be made by the end of the year – and continue to enforce the EU-wide arrest warrant.

But some Brexit-supporting MPs have attacked moves to tie Britain into EU police and criminal justice measures, on the grounds of cost and democracy.

They argue it will involve spending millions of pounds on new IT systems to allow EU members to search this country’s DNA, fingerprint and vehicle registration databases.

Some have disputed a guarantee that only the personal details of people who have been convicted of an offence in the UK will be handed over to a foreign police force.

And they have attacked putting Britain’s DNA and fingerprint databases under the control of the European Court of Justice (ECJ) – which Ms May has vowed to break from.

One Brexit-supporting Conservative MP, Anne-Marie Trevelyan, said she would be writing to David Davis, the Brexit Secretary, to demand the move was only temporary.

She told The Independent: “I have no problem with data-sharing if it’s important in fighting crime, but as long as that data remains under our control.

“It will be unacceptable to the British people – who have voted to regain control of their nation – to find out that their most important data, such as fingerprints and car registrations, will continue to come under the ruling of the ECJ.”

Tim Farron, the Liberal Democrat leader, said it was now crucial that the Prime Minister also “sign up to Europol and other crime fighting powers”.

He said: “Organised crime and criminals do not stop at the cliffs of Dover and Britain gains from being part of the European Arrest Warrant, Prüm and Europol.

“I worry that with Brexit we will recreate the Costa Del Crime and we should do everything in our power to make sure no criminal can avoid justice.”

Mr Lewis revealed the decision in a letter to the Commons European Scrutiny Committee, which assesses all draft EU legislation brought before Parliament.

He wrote: “The Government does not envisage the initial timeline for implementing Prüm being affected by the decision to leave the EU, and is continuing with the implementation of Prüm.

“We are confident that the exchange of data will start to take place in 2017.”

Hallo Dave. Yes you cannot escape the political corruption and twisting perversion of powers.
Lawyers for Britain have just made the same point as Rees Mogg.
If our MPs pursue this line then there will be a real and deep revolt against the stitch-up with all sorts of dangerous implications. Its early days yet and of course we await the result of the government's appeal to the SC.
I'm glad that the ever vigilant pen of that excellent commentator Gerald Warner has been busy so promptly with this piece. He says it all! (below)
Regards
Graham

A PROVOCATION TOO FAR.

"Parliament v. People is the true title of the legal case heard in the High Court today, in which three judges ruled that 650 individuals had the right to frustrate the wishes of 17.4 million voters. The official term for this pyramid of oligarchic control by a tiny, privileged minority is parliamentary democracy.either the courts nor Parliament had any locus in this dispute. The referendum on 23 June was one of those rare and exceptional occasions when the entire citizenry of Britain had, with Parliamentary agreement, dispensed with the usual intermediary representatives and institutions to whom they normally delegate the governance of their country, for the purpose of reaching a major decision by universal consent.
By the European Referendum Act 2015, Parliament temporarily resigned its authority back into the hands of those from whom it is derived: the electorate. This was voted for by 544 MPs to 53. It is arguable that the dissenting 53 have some case for interfering with Brexit; the 544 have not the shadow of a justification for doing so.

The House of Commons resigned its responsibility on this issue because it was confident the electorate would vote the â€œrightâ€ way, i. e. Remain. Now that it has voted the â€œwrongâ€ way, MPs want to intervene and amend the Brexit process into a de facto Remain settlement. Do they and the activist judges who have sought to frustrate the clearly expressed will of the British people realize how dangerous their behaviour is?

During the past half-century the twin enforcement instruments of unpopular liberalism have been the courts and the legislature, increasingly unrepresentative of the national will. As mass immigration, to take a key issue on which there is a fissiparous divide between the establishment and the population at large, MPs facilitated the influx and the multiculturalism that alienated the public, while judges notoriously lenient with serious criminals imposed hate laws in which the doctrine of â€œaggravatedâ€ offences carrying heavier sentences ended the ideal of equality under the law, hard won over centuries.

There is now widespread contempt for the law due to its manipulation by the establishment against the public interest. The High Court should have refused to hear todayâ€™s case on the grounds that no court should attempt to tamper with the will of the nation, expressed in a referendum pre-sanctioned by Parliament. But judicial activism has become part of the political landscape. The extent to which a handful of activist judges can distort a constitution was dramatically illustrated as early as 1973 in the United States with the Supreme Court ruling in Roe v. Wade.

Now there is talk of Parliament â€œasserting itselfâ€, â€œtaking back controlâ€ and so on. The reality is it is trying to take back a control it voluntarily relinquished, not from the executive but from the people. The royal prerogative, in this situation, is a more genuinely democratic instrument of government than a partisan House of Commons attempting to renege on the compact it made with the electorate in the Referendum Act.

Can you imagine how Brexit would fare at the hands of a Remain-dominated House of Commons? The hundreds of amendments and conditions with which Europhile MPs would hobble the Government? This legal case is nothing to do with maintaining the constitution and everything to do with neutering the popular decision of 23 June. It would be difficult to exaggerate the danger of the confrontation being provoked by the two most unpopular institutions in the country, drunk on entitlement.

Behind the legal jargon and pompous political declarations, the doctrine being proclaimed is that the largest popular vote ever recorded in British history can be obstructed and reduced to next to nothing at the whim of the moat cleansers and duck-house maintainers at Westminster. Never have we seen a more dramatic illustration of the weasel â€œI am a representative not a delegateâ€ with which Sir Bufton traditionally justifies his latest treachery.

Yet this perverse decision may be providential. Despite public outrage over the MPsâ€™ expenses scandal, the Augean stables remain uncleansed. MPs are now likely to offer the public a provocation too far. The same applies to the politicised courts which have no right to involvement in Brexit. The British are slow to anger, implacable once aroused. There are petty tyrants nearer home than Brussels who need to be removed. The backlash from this provocation will exceed anything witnessed in any of our lifetimes. It could lead to very radical reform. The House of Commons needs to be tamed as the House of Lords was a century ago.

And a petty indulgence, if one may: I told you so. From the first it was evident that the absurd Article 50 was never going to be anything other than a drag-anchor on Brexit. The week after she became Prime Minister, Theresa May should have discarded that cumbrous mechanism, notified Brussels of our departure, declared UDI, sent a team to negotiate trade matters and set civil servants to drafting a comprehensive EU Law Repeal Bill. Failing that, she should at least have triggered Article 50 instantly.
Instead, endless delay and prevarication, the manufacture of innumerable issues for pointless â€œnegotiationsâ€ and obstruction by civil servants have allowed fanatical Remainers to regroup and lay a minefield gravely prejudicial to investment, prosperity and, above all, sovereignty.

The one hope is that, on appeal, the Supreme Court will have the sense quickly to quash this absurd challenge to the will of the British people. Otherwise we shall find ourselves in a constitutional crisis on the scale of 1642 and 1688. Iain Martin rightly conjures the prospect of millions of angry people descending on London. Unless, however, the anti-British elite surrenders unconditionally and abandons its ambition to annul the popular will, that may be the beginning of events whose end cannot be predicted.

Jacob Rees-Mogg, MP, said the High Court's ruling goes against the decisions it has made in the past, where it has upheld the royal prerogative.

"What surprises me is every court case brought against a European treaty [where] the powers were flowing to the European Union the courts upheld, they upheld the royal prerogative."

They stand for:
Among other significant challenges, Brexit means:
People who voted Leave and people who voted Remain coming together to find the best way forward.
Using all our people and resources to help us navigate through the most significant change to the UKâ€™s economic, diplomatic and democratic arrangements in 40 years.
Engaging individuals and communities across the country with the Brexit process
Improving how our politics works so that the divide between voters and politicians – something the referendum exposed so starkly â€€“ is bridged, and the bond between the people and their government is irreversibly strengthened
Ending the free movement of people from the EU without denying our businesses with the skills and talent they need to grow.
As free movement ends, enabling EU nationals living and working in Britain to stay here and feel valued, and ensuring the same for UK nationals in EU countries.
Amending and incorporating large areas of EU regulation into UK law as UK legal supremacy is restored.
Identifying effective new funding formulas for agriculture, science, research and poorer regions and agreeing priorities for additional investment when the UKâ€™s financial contribution to the EU budget ends.
Getting British businesses the best possible deal to sell goods and services into the Single Market
Negotiating new trade agreements with the worldâ€™s fastest growing markets
Redefining and strengthening our defence and security relationship with European nations and our NATO allies
Supporting EU nations to strengthen the European economy, meet environmental challenges together and manage migration flows on the EUâ€™s borders
Learning to think globally, not just regionally

The Queen supported EU withdrawal in the run-up to the referendum, it has been claimed.

Laura Kuenssberg, the BBC's political editor, said she was told about the alleged comment months before the eventual appearance of The Sun's "Queen backs Brexit" headline in March.

The front page story caused one of the biggest rows of the referendum campaign, leading to a successful complaint to press regulator Ipso by Buckingham Palace, which said it was "misleading".

The Sun stood by its story, saying it had two sources for the claim that the Queen had "let rip" at then deputy prime minister Nick Clegg about Europe at a lunch at Windsor Castle.

Mr Clegg has named then justice secretary Michael Gove as the source of the story, but Mr Gove has never confirmed the allegation.

Ms Kuenssberg said that her "jaw hit the floor" when an unnamed contact told her that the Queen had told a private lunch that she could not see why Britain could not simply leave the EU.

The BBC political editor told BBC Radio 4's Today programme: "In a casual chat with one of my contacts, they said 'Do you know what? At some point this is going to come out, and I'm telling you now and I don't know if the BBC would touch it, but the Queen told people at a private lunch that she thinks that we should leave the EU'.

"Apparently at this lunch she said 'I don't see why we can't just get out. What's the problem?'

And a row ensued. "My jaw hit the floor. Very sadly, I only had one source. I spent the next few days trying to prove it. I couldn't find the evidence.

"Lo and behold, a couple of months later, someone else did. Of course then ensued a huge row between that newspaper and the Palace over what had really been said or not said.

"There were lots of moments in the referendum campaign but for me that was one when my jaw did hit the floor. Very frustratingly, the story did eventually emerge, whether it was true or not."

More about: BrexitQueen
‘I think I’d better leave now’ Theresa May said to EU leaders when they refused to discuss Brexit
People are being invited to donate towards a fund to sue Nigel Farage
Prince Charles just issued a veiled warning over Donald Trump which everyone should listen to

Lets not forget that this royal parasite that nationalists love so much, took a fake name of Windsor to hide her real surname in case of anti-German resentment after WW2 .. Queen Elizabeth Saxe Coburgh-Goetha II, of Romanian-Hungarian lineage._________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
http://aangirfan.blogspot.comhttp://aanirfan.blogspot.com
Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

Lord King says there are 'real question marks' over whether it should seek to remain in the customs union

Andrew Woodcock, Gavin Cordon 16 minutes ago

The UK should leave the European single market because the EU has been "pretty unsuccessful", a former governor of the Bank of England has said,

Lord King, who led the Bank for 10 years, warned there are "real question marks" over whether it should seek to remain in the customs union, which might constrain its opportunities to forge new trade deals.

The crossbench peer also acknowledged that Brexit will bring "great political difficulties", but said that there would also be "many opportunities" economically for the UK striking out on its own.

His comments came as it was reported that the billionaire businessman chosen by US President-Elect Donald Trump as his new trade chief has said that Brexit represents a "God-given opportunity" for other countries to take business away from the UK.

Wilbur Ross, the US commerce secretary designate, said Britain was facing a "period of confusion" following the vote to leave the EU and that it was "inevitable" there would be "relocations", according to The Times.

Speaking to BBC Radio 4's Today programme, Lord King said it was too early to judge the economic impact of Brexit, despite data since the June 23 referendum being more positive than some economists had predicted.

He said: "I think the challenges we face mean it's not a bed of roses - no-one should pretend that - but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take.

"There are many opportunities and I think we should look at it in a much more self-confident way than either side is approaching it at present.

"Being out of what is a pretty unsuccessful European Union - particularly in the economic sense - gives us opportunities as well as obviously great political difficulties."

Lord King said it made no sense for the UK to seek to join Norway as a non-EU member of the single market, which would allow free access for businesses but probably mean accepting freedom of movement of EU citizens.

What experts have said about Brexit
11
show all
And he raised doubts over the merits of remaining within the customs union, which would allow Britain to trade goods without border tariffs, like Turkey, but restrict its ability to strike its own trade deals.

A Turkey-style arrangement would make it "more difficult to take advantage of those opportunities," said Lord King.

"I don't think it makes sense for us to pretend we should remain in the single market and I think there are real question marks about whether it makes sense to remain in the customs union. Clearly if we do that we cannot make our own trade deals with other countries."

Lord King said the Government should outline its policies on immigration "sooner rather than later", arguing that it would be a "mistake" to make them part of the withdrawal negotiations which will be triggered when Theresa May invokes Article 50 of the EU treaties next year.

Mr Ross will be responsible for negotiating a free trade deal with the UK and his reported comments will raise concerns the incoming US administration will seek to exploit Britain's isolation following Brexit.

His remarks were said to have been made to an audience of Cypriot financiers in the days following last June's referendum vote - before he had been appointed to Mr Trump's cabinet.

"I recommend that Cyprus should adopt and immediately announce even more liberal financial service policies than it already has so that it can try to take advantage of the inevitable relocations that will occur during the period of confusion," he is quoted as saying.

He is said to have added that the UK's withdrawal from the EU was a "God-given opportunity" for financial rivals of the City of London, naming Frankfurt and Dublin in particular.

Labour said his comments, should be a "salutary warning" that other countries were ready to take advantage of the UK's vulnerability post-Brexit.

But a Government spokesman sought to play down the report saying: "We will build a relationship with the new administration based on substance not rumour."

Meanwhile, Lord King defended his Bank of England successor Mark Carney against charges that he has been too "political" in warning about the possible economic consequences of leaving the EU.

Mr Carney had been put in an "almost impossible position" but had remained within the Bank of England's remit to outline the possible path of economic growth in the short term should Britain vote to leave the EU, he said._________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
http://aangirfan.blogspot.comhttp://aanirfan.blogspot.com
Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

No single market
We are meant to be operating under the bloc’s Single Market mechanism as an EU member.
The EU describes it as “one territory without any internal borders or other regulatory obstacles to the free movement of goods and services.” It’s basically meant to stimulate competition and trade, improve efficiency, and helps cut prices. We are meant to operate as one. Basically, it only works if all countries are identical and work as a hive, like the Borg in Star Trek. That sounds like a Utopian ideal, and it has not worked at all. At the beginning of September, my colleague Oscar Williams-Grut pointed out that the so-called Single Market has a massive problem – Germany. German manufacturing is a booming behemoth, while almost every other nation bar Greece is at some sort of low. Britain’s manufacturing sector is not he same as it was back in 1950s, and we now depend a lot on imports and exports (I will come to this later). Greece’s rebalancing towards exports has been achieved simply by imports collapsing. All you need to do is take one look at that country and realise there is nothing about that nation that is rebounding at the moment.

At the mercy of Germany

Concerns over the Single Market being a whole load of poppycock are more relevant than ever, especially since the eurozone debt crisis of 2009.
First and foremost, even though we are meant to be part of one big unit, we have no fiscal union to address underperforming areas.
In Britain, for example, London may generate greater amounts of wealth than certain regions in the country. If somewhere like Nottingham was struggling, the money is redistributed to pay for welfare or prop up the local economy. Infrastructure, like new railway lines, could be installed to link cities and create greater connection for people working or looking to expand business. In the EU, we don’t have this. Just look at Greece and the sorry mess it is. Sure, we lend money and force them to gut their country from the inside out, but a loan is not a re-distribution of wealth. Countries that need to devalue their currency to spur exports can’t. The bloc is not a “single” anything.

Destroying national sovereignty

Relinquishing national sovereignty sounds a lot like right-wing hooey, but having a look at how the EU has operated in the worst of times hasn’t resolved any of these concerns.
Sovereignty is meant to be when a state has the absolute power to govern itself, make, execute, and apply laws, and impose and collect taxes.
Of course, being part of a union means we should all technically share that burden and have a say in what laws are enacted, while also making sure others aren’t penalised to the advantage of other nations. It shouldn’t be all bad. Take a look at Greece again. The country has teetered on the brink of collapse so many times, it might as well jump off the cliff. But it can’t because it’s stuck with loans it doesn’t want, that seem near impossible for it to pay back. The one time it did show some semblance of sovereignty or power was at its referendum on the bailout. The public voted against the extremely harsh (and arguably necessary) conditions in exchange for emergency cash. And we all know how that turned out – an utterly pointless exercise. All that happened is that Greece wound up owing its creditors so much that they used it against them in their next round of negotiations.

Renegotiations look impossible
There are a few things that Britons are getting really tired of, and a growing mountain of examples to show how the UK doesn’t really have much of a say in what happens within the bloc.Since 2010, the EU has introduced over 3,500 new laws affecting British business. Business for Britain highlighted in its report in June that the sheer volume of red tape that affects the UK is costing billions.

“The British Chambers of Commerce has shown that the total cost of EU regulation is £7.6 billion per year,” said the report. “Since the Lisbon Treaty came into force in December 2009, it has cost British businesses £12.2 billion in extra regulation.”

“When the UK joined the EU in 1973, we had 20% of the votes. Today we only have 9.5% of the votes. British MEPs voted against 576 EU proposals between 2009 and 2014, but 485 still became law.”_________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
http://aangirfan.blogspot.comhttp://aanirfan.blogspot.com
Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

Who is Who:
The main sponsors of the “Brussels EU”
http://www4.dr-rath-foundation.org/brussels_eu/who_is_who/architects.h tml
Picture of a meeting of Hallstein, Erhard, Westrick, Carstens and von Hase
CE | Brussels | P-002432/00-3 | 19640424
From the beginning, one of the main financiers of the “Brussels EU” was the West German Government. On April 24, 1964, the key architects of the “Brussels EU” – all of them active members of the IG Farben/Nazi coalition during WWII – met at the “Brussels EU” headquarters to stake their claims on the future of the European continent. Apparently they were so sure about their success to take control over Europe in their 3rd attempt, via the “Brussels EU”, that they posed proudly for this picture. The men shown in this picture are:

U Commission President Walter Hallstein – the boss of the “Brussels EU”
German Chancellor Ludwig Erhard
Ludger Westrick, Head of the German Chancellery
Karl Carstens, German Secretary of State for the Ministry of Foreign Affairs
Karl-Günther von Hase, Head of the Press and Information Service of the German government

Newly discovered documents reveal that the undemocratic structure of the "Brussels EU" has its roots in the post WWII plans of the IG Farben/Nazi-coalition in a conquered Europe.

Following are a few of the most important documents, to be used by teachers, politicians and anyone who is interested in preventing the “Brussels EU” from establishing a dictatorship of corporate interests in Europe.

It outlines the plan of the world’s largest chemical/pharmaceutical cartel, IG Farben, for a Europe under its control.
This letter is a response to the request by the Nazi government to IG Farben for its blueprint for a new economic order in Europe under the IG Farben/Nazi-coalition.
The date of the letter, July 20, 1940, corresponds with the first phase of WWII, where the IG Farben/Nazi-coalition had conquered central and western Europe in Blitzkriegs. In Summer of 1940, after the conquest of France, it seemed only a question of time until the IG Farben/Nazi-flag would flutter over Europe.
It is a highly significant fact that the greatest concern of IG Farben in a subjugated Europe was the new regulation of patent law and its control over the chemical/pharmaceutical markets of Europe via patented products.
This document was also part of the Nuremberg War Crimes Tribunals against IG Farben, documented at www.profit-over-life.org

The poll's findings suggest that most Scots do not want another referendum on independence despite the EU vote
(Photo: Getty) Chris Green 0:01 Saturday July 30th 2016
A clear majority of Scots want the country to stay part of a post-Brexit UK rather than becoming independent and remaining part of the EU, an opinion poll has found. The results of the survey, carried out a month after the result of the European referendum, calls into question Scotland’s appetite for a re-run of 2014’s vote on independence. “The arguments for Scotland remaining a part of the UK are just as compelling as they were in 2014 – in or out of the EU” Lord Dunlop The YouGov poll found that 46 per cent of Scots would prefer to remain part of a post-Brexit UK, while only 37 per cent favoured of breaking up the Union and being allowed to remain in the EU. The results will be seen as a blow to the SNP’s hopes of securing independence for Scotland following the UK’s decision to leave the EU last month, which came despite 62 per cent of Scots voting to remain.
IndyRef2? Nicola Sturgeon, the SNP leader, warned in the aftermath of the result that a second referendum on Scottish independence was now “highly likely” as voters would be furious at the prospect of being dragged out of the EU against their will. The survey also found that the result of the EU vote has not had much of an impact on people’s opinions on independence, with a majority of people continuing to favour remaining part of the UK. Only 47 per cent said they want Scotland to become an independent country, while 53 per cent want to keep the Union intact, the poll of more than 1,000 Scottish adults found. The survey also showed that more Scots would rather be part of a post-Brexit UK with no access to the EU’s single market than leave the Union to secure continued free trade, with 40 per cent favouring the former scenario and only 34 per cent the latter. “Inevitably, some will suggest that the high-water mark of Scottish independence has now passed, especially as it was thought that leaving the EU might persuade No voters to change their minds and vote against the Union,” said Joe Twyman, YouGov’s head of political and social research. “However, the situation is, naturally, more complicated than that. There remains a great deal of uncertainty about what the UK’s relationship with the EU will look like…once precise details of Brexit are hammered out it could change the whole context of the independence debate.” ‘Divisive constitutional debate’ The Scottish Conservatives said the poll’s findings “completely exposes the SNP’s post-Brexit hyperbole” and called on Ms Sturgeon’s party to “get back to the day job, instead of agitating for yet another independence drive”. Scotland Office Minister Lord Dunlop added that another “divisive constitutional debate” was not want the country wanted. “The arguments for Scotland remaining a part of the UK are just as compelling as they were in 2014 – in or out of the EU,” he said. “The Prime Minister has been very clear that we are going to make a success of Brexit, and the focus now needs to be on collaborative working with the Scottish Government as ‘Team UK’ to ensure the best possible deal for Scotland and the rest of the UK.” However, the SNP pointed out that support for independence had risen since YouGov’s last poll on the subject, suggesting that No voters were reconsidering their views in light of the UK’s decision to leave the EU. “In light of the overwhelming vote to remain in the EU, it is right that the Scottish Government explores every option to protect our relationship with and place in the EU – including the option of another independence referendum if that is what it takes,” said SNP business convener Derek Mackay.

_________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
http://aangirfan.blogspot.comhttp://aanirfan.blogspot.com
Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

If these figures are correct, it is a much higher entry point than the previous referendum. I'd take that. Clearly it's inaccurate because the country has voter fatigue. Their just simply isn't the energy left to even be bothered about another one, even if Serco did rig the last one, or whether lots of obstacles were in the way, i just don't think it would work.

ReutersMarch 29, 2017
European Competition Commissioner Vestager holds a news conference after EU antitrust regulators blocked the proposed merger of Deutsche Boerse and the London Stock Exchange, in Brussels
European Competition Commissioner Margrethe Vestager holds a news conference after EU antitrust regulators blocked the proposed merger of Deutsche Boerse and the London Stock Exchange on Wednesday as expected, saying that the deal would have harmed competition because of the companies' combined market power, in Brussels, Belgium March 29, 2017. REUTERS/Yves Herman

By Foo Yun Chee

BRUSSELS (Reuters) - An attempted merger between the German and British stock exchanges was struck down by European regulators on Wednesday, formally ending a deal that unraveled in the wake of Britain's vote to leave the European Union.

"We could not approve this merger on the terms ... proposed," said European Competition Commissioner Margrethe Vestager, blocking the 29 billion-euro ($31 billion) deal to combine Deutsche Boerse (DB1Gn.DE) and the London Stock Exchange (LSE.L).

A merger would have created Europe's biggest stock exchange. But the European Commission objected, saying the deal, which was the pair's fifth attempt to combine, would have resulted in a monopoly in the processing of bond trades.

Selling MTS, the LSE's Italian fixed income trading platform, would have removed the Commission's concerns but LSE declined to do so.

"How exactly these markets work and the products traded can seem like rocket science," said Vestager. "But actually our competition concerns with this merger are very simple."

"In some markets Deutsche Börse and London Stock Exchange both provide the same services. And in some of these markets they are essentially the only players and the merger would therefore have led to a de facto monopoly."

The EU rejection comes on the day the British government started proceedings for leaving the European Union, a move which industry sources have said undermined the merger plans.

The Brexit decision had prompted German politicians to demand that the headquarters of the exchange group move from London to Frankfurt, creating a conflict that caused the deal to unravel.

Further complicating the picture, German police and prosecutors had opened an investigation into possible insider trading by Deutsche Boerse Chief Executive Carsten Kengeter, the man who was set to lead the combined group.

"It is always the same," said one Deutsche Boerse manager, commenting on the long saga of the two exchanges trying to join together. "Attempt to merge. Fall on your face. Save up money. Next merger attempt. Fall on your face," he said.

While Wednesday's announcement marks the official end of the deal, there was already no hope left that it would go ahead after the LSE took the unusual step last month of saying it would not accede to EU demands that MTS had to be sold if the deal was to be approved.

Shares in the LSE were up 2 percent at 3,085 pence by 1130 GMT on Wednesday, after it announced a share buyback, while shares in Deutsche Boerse were up 1.7 percent at 83.23 euros.

POWER STRUGGLE

The proposed merger threw a spotlight on clearing, whereby stock, bond and derivatives trades are completed, even if one side of the deal goes bust.

The LSE's clearing arm, LCH, is one of the world's biggest, and the exchange had agreed to sell its LCH's Paris arm to French bourse Euronext if the merger went ahead. That sale will now not happen, the LSE said.

This presents a problem for Euronext, which had opposed the tie up of London and Frankfurt, because it uses LCH in Paris to clear its own share trades under a deal that expires next year.

Euronext Chief Executive Stephane Boujnah said on Wednesday that it was still willing to buy the business.

"But in the absence of obtaining an agreement, Euronext is fully committed to securing the best long-term solution for its post-trade activities," Boujnah said.

LCH in London dominates the clearing of euro-denominated derivatives, an activity some EU policymakers want shifted to the euro zone to come under the supervision of the European Central Bank because Britain is leaving the EU.

The bourse merger could have helped by shifting euro clearing to Deutsche Boerse's Eurex arm in Frankfurt. The collapse of the deal may now prompt the European Union to take action to engineer such a shift.

https://www.youtube.com/channel/UCae6VKBzVixCdZ8m9-qz4UQ
The original creator of the EU was a man named Richard Coudenhove Kalergie. He launched it in the 1920's, under the name, The Pan European Movement.
He was an evil man but he certainly wasn't a National Socialist.
He said in his book, Practical Idealism, "the European race must disappear and be replaced by a negro/Asian race".
He wanted all the Europeans to stop existing no matter where in the world they reside.
His book contains the first use of the idea of"diversity" to target a race of people and destroy it.
Today, European leaders are given the Kalergie award when they have shown particular
zeal in the destruction of their white population through mass immigration for example.
Recent recipients of the award are Tony Blair and Angela Merkel, anyone who doubts this, need only Google the information.
The European Union was created to destroy the European people, Britain have to leave it if we want to survive as a country and more importantly as a people.﻿

Newly discovered documents reveal that the undemocratic structure of the "Brussels EU" has its roots in the post WWII plans of the IG Farben/Nazi-coalition in a conquered Europe.

Following are a few of the most important documents, to be used by teachers, politicians and anyone who is interested in preventing the “Brussels EU” from establishing a dictatorship of corporate interests in Europe.

It outlines the plan of the world’s largest chemical/pharmaceutical cartel, IG Farben, for a Europe under its control.
This letter is a response to the request by the Nazi government to IG Farben for its blueprint for a new economic order in Europe under the IG Farben/Nazi-coalition.
The date of the letter, July 20, 1940, corresponds with the first phase of WWII, where the IG Farben/Nazi-coalition had conquered central and western Europe in Blitzkriegs. In Summer of 1940, after the conquest of France, it seemed only a question of time until the IG Farben/Nazi-flag would flutter over Europe.
It is a highly significant fact that the greatest concern of IG Farben in a subjugated Europe was the new regulation of patent law and its control over the chemical/pharmaceutical markets of Europe via patented products.
This document was also part of the Nuremberg War Crimes Tribunals against IG Farben, documented at www.profit-over-life.org

European Union leaders unanimously adopted their Brexit strategy at a special summit in Brussels on Saturday, agreeing on the guidelines for the bloc’s negotiations with London. This was the first meeting without the UK since the British premier triggered the exit process a month ago. The EU leaders warned Britain that its exit from the European Union would come at a cost and that London should pay the price for the decision. Press TV has talked to David Ayrton, a member of Britain's Labour Party, and Tony Gosling, an investigative journalist, to discuss the reasons behind the European Union's toughness in dealing with Britain.

Tony Gosling maintains that by adopting an unbendable stance against Britain, the EU leaders intend to make an example of Britain for other European countries that might be planning to follow suit and abandon the bloc’s membership.

“It is not going to be punitive. It seems that they are speaking with a forked tongue at the European Union in Brussels about how they are going to [deal] with this,” Gosling noted.

“I think what is happening right now is that they are dusting off the torture chambers in Brussels,” he continued. “They are preparing to put Britain on the rack. The most important thing to do, from their point of view, is to make an example to other European countries. Particularly this year we have got the French presidential elections, just about to be completed, and we have got German elections coming later on this year. A very strong message needs to be sent for the German political classes, opinion formers, the media, and the people that Britain is going to pay the price for this.”

Gosling further defended Britain’s decision to pull out of the European Union, arguing that the EU political structures, including the European Commission, have been created based on undemocratic procedures.

“What we are removing ourselves from as Brits is the European political structures; that is to say, the European Commission which is appointees-only. This is not democracy. These people are appointed to those jobs. They are failed politicians, not just failed but rejected politicians. People who have been kicked out in democratic elections around Europe find themselves suddenly at the top of the tree politically, drafting new laws in the European Commission,” Gosling commented.

He also censured the performance of the European Parliament which he described as a massive “gravy train” and hailed Britain’s upcoming detachment from the body. “It’s not a parliament really. Because they cannot draft laws in the European Parliament. All they can do is to just delay them. And it ends up being a kind of pointless exercise,” the journalist analyzed.

Gosling also said that it is a good thing to be out of a structure like the European Court of Justice. As a case in point, he referred to one of the most recent decisions made by the court which allows European employers to sack an employee just for wearing a headscarf. They even insist that this is not considered as religious discrimination, he said.

The image shows David Ayrton (L), a member of Britain's Labour Party, and Tony Gosling, an investigative journalist, on Press TV's 'The Debate' show April 30, 2017.
The other panelist on the show, David Ayrton , however suggested that the main motivation behind Britain’s exit from the European Union is economy, and therefore it is better for politicians and the media to concentrate on the economic aspects of the process rather than the democratic deficiencies of the EU.

Ayrton explained that all major institutions, including those of the UK, have important democratic deficits, which highlights the need for a constant process of democratization.

David Davis has ALREADY caved in to EU demands in the Brexit negotiations
http://www.mirror.co.uk/news/politics/david-davis-brexit-briefing-live -10649824
The Brexit secretary has agreed to the EU's timetable on talks - but insists it's "consistent" with the Article 50 letter_________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
http://aangirfan.blogspot.comhttp://aanirfan.blogspot.com
Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

EU’s Vera Jourova met on 26 June with Israeli justice minister Ayelet Shaked, whose 2014 Facebook post called for genocide of Palestinians. (via Twitter)
The European Union is pledging to help Israel crack down on critical speech.

Jourova said that Europe had made “substantial progress” in removing “illegal hate speech” through cooperation with technology firms.

Her visit was billed as part of the EU’s cooperation with Israel aimed at “combating racism, xenophobia and anti-Semitism.”

Her Israeli host, foreign ministry director general Yuval Rotem stated, “Israel believes that the IT industry needs to take on greater responsibility in the proactive effort to detect hate speech online.”

Target is criticism of Israel
But while genuinely combating hate speech might be laudable, the evidence is that this initiative is more about trying to suppress criticism of Israel.

The joint statement issued by the EU and Israel places their effort in the context of the European Parliament’s recent endorsement of the so-called International Holocaust Remembrance Alliance (IHRA) working definition on anti-Semitism and calls for using it “for better training of law enforcement and government.”

The IHRA definition of anti-Semitism is virtually identical to the one originally drawn up by pro-Israel lobbyists as part of an exercise coordinated by a European Union agency.

That definition was never formally adopted by the EU.

But it was embraced by the US State Department in 2010 and Israel lobbyists have continued to push institutions and governments around the world, including the US Congress, to formally endorse it.

It contains the uncontroversial statement that anti-Semitism “is a certain perception of Jews, which may be expressed as hatred toward Jews,” and which may be manifested through rhetorical or physical attacks against Jews and Jewish institutions.

But the definition is flanked by an explanatory memorandum, citing examples that muddy the waters between anti-Semitism – bigotry against Jews – on the one hand, and criticism of Israel and its state ideology Zionism, on the other.

Those examples include “denying the Jewish people their right to self-determination, e.g., by claiming that the existence of a State of Israel is a racist endeavor.”

This could mean that arguing for a single, democratic non-sectarian state in historic Palestine in which Jews, Muslims and Christians enjoy equal protection amounts to anti-Semitism.

It also implies that accurately cataloguing the racist laws and principles Israel is founded on – especially the denial of the right of return of Palestinian refugees solely because they are not Jewish – could be deemed anti-Semitic.

“Bewilderingly imprecise”
“The definition deliberately elides the difference between criticizing Jews for imagined negative characteristics, and criticizing Israel for very real negative behaviors,” the Jewish-led activist group Free Speech on Israel wrote to European Parliament lawmakers in March. This is no accident. “The construction of a defensive shield against advocacy by and on behalf of Palestinians is the specific purpose that the definition was created for,” Free Speech on Israel added.

David Feldman, director of the Pears Institute for the Study of Antisemitism at Birkbeck, University of London, has called the definition “bewilderingly imprecise” and the accompanying examples dangerous because they may “place the onus on Israel’s critics to demonstrate they are not anti-Semitic.”

Even the lead author of the original definition, former American Jewish Committee executive Kenneth Stern, has strongly opposed efforts to enshrine it in legislation.

In a letter to members of the US Congress last December, Stern warned that giving the definition legal status would be “unconstitutional and unwise”

Stern highlighted the difficulty with legislating against political opinions, asking, “If denying the right of Israel to exist is enshrined as anti-Semitism by law, would Congress then pass parallel legislation defining opposition to a Palestinian state as anti-Palestinianism?”

Stern stated that the original definition he had drafted “was never intended to be used to limit speech … it was written for European data collectors to have a guideline for what to include and what to exclude in reports.”

Yet the EU is now signalling that it plans to use the definition to train police, who will presumably use it to monitor and punish citizens’ utterances.

Ignoring Israeli incitement
Israel and its supporters have long pressured social media companies, especially Facebook, to crack down on Palestinians, and the company has in the past blocked the accounts of Palestinian journalists.

Israel has routinely jailed Palestinians for expressing opposition to its policies in online forums.

During her visit, the EU’s Jourova met Ayelet Shaked, the Israeli justice minister.

Jourova tweeted that her meeting with Shaked would herald “deeper EU-Israel cooperation.”

In 2014, Shaked notoriously promoted a call for genocide of the Palestinians on Facebook.

Shaked’s posting declared that “the entire Palestinian people is the enemy” and justified its destruction, “including its elderly and its women, its cities and its villages, its property and its infrastructure.”

The posting also called for the slaughter of Palestinian mothers who give birth to “little snakes.”

The EU has never launched an initiative to hold Israeli leaders accountable for their pervasive racist and genocidal incitement, whether against Palestinians or refugees and asylum seekers from African states.

The City of London is crucial to the UK economy. Many fear that – as a consequence of Brexit – the City will be harmed by a loss of access to the EU single market.
However if you look at what the City actually does, it is almost impossible to find any activity which requires single market access. Unfortunately for the City’s enemies in the EU, money moves around the world at the push of a button and international finance is very difficult to control.
The EU banking passport is not a big part of the City’s activities. It might help some companies to provide financial services to retail customers, but nearly all of the City’s transactions are not with retail customers but with banks and other financial institutions, who are allowed to do business in financial centers outside the EU.
The City’s main activity is to help savers invest in assets like equities or bonds. Most investors invest in assets through funds. Most funds managed in the City and sold in Europe are EU authorised “UCITS” funds. The potential loss of UCITS is a much vaunted Brexit risk for the City.
However UCITS funds, typically issued in Dublin or Luxembourg, are currently managed by fund managers based all over the world, from London to Hong Kong. UCITS has no rules regarding where the manager of a UCITS fund must be based. Post Brexit, there is nothing to stop a City fund manager from issuing a fund in Dublin or Luxembourg which any investor in Europe can buy.
The City also makes a lot of money from acting as intermediary between investors buying and selling assets. Institutional or professional investors can trade through any broker they want, anywhere they want and on any exchange they want. Europe never has and never will have any say in this.
Euroclear in London is more of a risk.
The City has been under a lot of pressure in certain areas for years – quite independently from Brexit. Brexit is a convenient excuse for some banks to close unprofitable desks.
On the plus side, Brexit will enable London to benefit from its status as a place where European investors, financiers and companies can find refuge from Brussels’ infernal meddling.

Is Brexit bad for the City?

The City of London is a major employer and contributor to the UK economy and “contributes more tax than any other sector” according to TheCityUK, a high profile campaign group purportedly seeking to promote the City’s interests. The spill-over effect on the UK economy from the dazzling wealth of the City’s employees, though hard to measure precisely, is probably even more important than its direct contribution. When TheCityUK announced its post-Brexit strategy on 19 August 2016, it was widely reported in the media as signalling that it had given up on its “preferred option of full access to the single market.” As much of the City’s activity is with European counterparties (TheCityUK estimates that the City generates “a trade surplus of £19.9bn” with the EU), many – including some Brexit supporters – have argued that Brexit would have a disastrous impact on the City and therefore the UK as a whole.

However what is noticeable about dramatic headlines such as “Brexit Bulletin: Banks Already Plotting City Exodus” or sub-headlines like “The PM cannot please both the City and anti-EU voters” is how light on detail and vague they are. They are often based on anonymous “sources” and invariably contain neither relevant numbers nor any explanation of which activities performed by the City will be affected. Although TheCityUK claims to be an industry body its publications on the topic are similarly light on detail. The Brexit risks it lists on pages 5-7 of its Practitioner’s Guide to Brexit offer a good example:

It makes the generic claim that “EU membership has benefited the UK by creating the conditions to both expand UK exports and attract foreign direct investment (FDI), particularly in financial business” – but without giving any specific examples;
It notes that “250 foreign banks operate in London” and highlights the risk to the UK “if these firms were to reconsider their location in the event of a possible Brexit” – but without saying why they might wish to do so;
It says the UK could lose access to the UCITS funds market – but without explaining how UCITS works or why Brexit might have an impact.

The lack of informed detail in most contributions to this important debate is probably due to the fact that most journalists, like most people, have no idea what the City does or how it does it. That includes business correspondents at the BBC, who are generally clueless on the subject. After the multiple financial crises experienced in the last twenty years one might indeed be tempted to question whether the people working in the City really understand what they’re doing. My aim in this piece is to explain what the City does – in terms which make sense to someone who doesn’t understand the dark arts of finance – and how these activities might conceivably be impacted by Brexit. My view is that they won’t be.

What does the City actually do?

The City’s main activity is to manage financial assets, comprising savings or investments (such as mutual funds) as well as trade flows (such as currencies, trade bills and commodities). Sometimes savings and trade flows intersect, as when pension fund savings are invested in commodity futures that are also used by miners and industrialists to hedge metal prices. The City’s other activities – corporate finance and proprietary trading (“prop trading”) – are also briefly dealt with below. The management of financial assets, as well as corporate finance and prop trading, are all supported by a massive network of related activities: IT support, investment writing, client services and legal and compliance to name only the main ones. But ultimately those support activities are a cost which is funded by the main activities: managing financial assets, corporate finance and prop trading.

Managing financial assets

What does managing financial assets mean? Here is a “simplified” diagram, starting with you, the saver or investor.

Finance is the art of passing currency from hand to hand until it finally disappears

Robert W. Sarnoff (1918-1997), President of REC corporation (1948-1975)

This is all very straightforward and intuitive to me, but then I work in the business. Drawing this chart made me realise how complex it must be for some people to understand the City. However it really isn’t that hard. Bear with me, and everything will become clear.

Saving or investing involves handing money over and, in exchange for that money, getting a share in an asset which will give you a return. That’s what the savers and investors on the left hand side of the chart are all doing.

The most basic version of that process is handing your money over to your bank and earning (these days virtually no) interest on the deposit. However, to get higher returns, many people invest in longer term assets such as property, equity or bonds – all listed on the right hand side of the chart – which give you a higher return. Or so every investor hopes.

The City sits between the saver and the asset she invests in, earning fees on the way

When the money makes its way from left to right, from the saver or investor to the asset in which she buys a share, it has to pass through a number of intermediaries. You can’t just post a bid for a particular share on eBay after all, or sell your government bonds through the classified ads. Say you decided TJ Maxx (owner of TK Maxx in the UK) was a good investment. Imagine if, to really cut out all the intermediaries, you phoned people at random to find someone with the 150 shares of TJ Maxx you wanted to buy. And let’s assume one of the random punters you phoned miraculously had 150 shares of TJ Maxx that he wanted to sell! What happens next? You transfer the money to his bank account. But what happens if he doesn’t transfer the shares to you? What are you going to do? Maybe you ask him to transfer the shares first. But what happens to him if you don’t transfer the money? Let’s say you meet in a car park, hostage exchange style, where he hands you the certificates and you hand him the cash: how do you prove you bought the shares at that price when you fill out your tax returns?

The financial industry and the City are there to take care of all these details; to ensure the trade is recorded, money transferred from buyer to seller, assets transferred and held in custody, taxes paid (or evaded), dividends or bond coupons received etc. etc. On top of these administrative aspects, there needs to be an efficient way to find a price where buyers are willing to buy and sellers are willing to sell. Every buyer can’t discuss the price of the shares they want to buy with every seller over a cup of tea, as they might do with a second hand car. There has to be an efficient and continuous auction system, which is what a stock exchange is. Most of what the City does is to act as one of the intermediaries who make it possible for savers to invest in assets and, eventually, turn that investment back into cash. At each stage, your money changes hands and a fee is paid. By the time it eventually comes back to you, you hope there is something left.

DIY investing: the only way to avoid the City

To simplify things let’s follow the most simple form of investing, what I would call “DIY” investing, represented by the “direct investors” at the bottom of the chart above and reproduced here (I’ve changed the bullet points for “private assets” to show the private or unquoted assets, such as crowd funding, which small investors are able to access and which are typically not available to institutional investors):

In this case, the investor makes all her own decisions, and buys a share in any individual asset she chooses as directly as possible. So she may invest in her cousin’s business via an EIS scheme; buy a flat and rent it out; or open a trading account with IG index and trade in individual company shares or index futures.

The advantage of being a DIY investor is that you pay less in fees. You don’t pay a fund manager or any fund administration expenses for example. You do have to pay some fees however. You need to go through some kind of broker to trade stocks, and that broker in turn has to pay exchange fees. You will also typically buy and sell through a market maker who makes a spread between the bid price at which you can sell to him and the offer price at which you can buy from him. For unquoted investments like real estate or investing in your cousin’s company you will have agency and legal fees. But the bottom line is you do cut out a lot of fees. And online brokerage and exchange fees are very small. If everyone were like this, the City would hardly make a penny.

Most people invest through funds

Despite these cost advantages, most people do not invest like this, for a number of reasons:

Most people have neither the ability, nor the time, nor the confidence nor even the inclination to do so. For most people investment is like black magic. They would rather hand their money over to a (supposed) professional whom they pay to make investment decisions on their behalf. In the simplest terms, that’s why the City and other financial centers like New York and Hong Kong make so much money – the idea of gambling their savings on the stock exchange makes most people come out in a rash.
There are significant tax advantages to collective investment vehicles. The money paid into your pension fund, 401k or self-invested pension plan (SIPP) is exempt from income tax (although you have restrictions on when you can withdraw that money, such as having to wait till you reach retirement age to access your pension fund). And any capital gain realised within any fund (such as a pension fund or a UCITS fund) does not suffer capital gains taxes. So the fund can take profits in one asset and reinvest the proceeds into another asset within the fund without being taxed on the gains.
Collective vehicles enjoy economies of scale with respect to certain costs such as brokerage or custody fees.

Therefore, most savers’ money is invested through funds, rather than directly. This means it has to go through a number of intermediaries.

Intermediation, step 1: firms that deal directly with investors are regulated at the nation state level – nothing to do with Europe

At the start of the saver’s money’s journey from left to right we find the entities which first take the money off the saver, and which have a relationship with that saver. Even DIY investors usually need to use such companies. These entities are all on the left hand side of the chart above and reproduced here:

Anyone wanting to receive and take custody of money from an investor will be heavily regulated, but only by domestic regulators. SIPP providers, wealth managers and brokers who cater to individuals are regulated by the Financial Conduct Authority in the UK. Pension funds are regulated by the Pensions Regulator in the UK. The EU has nothing to do with any of this. And in fact it is quite a domestic industry. Pensions are a fiercely domestic matter and each country in the EU has its own national pensions regulation.

The few personal investment companies that operate cross border in Europe, such as IG or ING direct, have to be regulated by the domestic regulator in each market in which they operate. IG Group is one of the – if not the – most successful examples of cross border expansion in personal investment in the EU, generating just under £100m in revenue with 35m clients in seven countries in Europe, including Germany, France, Italy and Spain. To put this into perspective, IG’s revenue is a small spread charged on client trades, so the face value of the trades IG handles for European clients is over 100 times its revenue, or around €50m per day. For those of you not fluent in French, this extract from IG’s French website shows that even though it is regulated by the FCA in the UK, it still needs to be authorised by the Bank of France to take orders in CFDs:

The reason for this is simple. Any company offering CFDs in France requires authorisation by the Bank of France, be they British or French or whatever. Although the passport allows IG to operate as a retail financial services firm in France, it has to follow the same rules as all French retail financial services firms, which in this case includes CFD authorisation from the Bank of France. Similarly in insurance, each national regulator has its own, sometimes highly idiosyncratic, capital solvency requirements. Although the passport would allow a UK authorised firm to set up as an insurance company in an EU country, it would still have to hold enough capital in that country to comply with solvency requirements which are set by its national regulator.

For all the general chit chat about the UK benefiting from a single market in European financial services, any examination of the handful of real companies that actually operate cross border in Europe on any scale reveals that the personal savings market in Europe is still regulated at the national level. So much for the famous EU banking passport.

As an aside, the second iteration of the EU’s “Markets in Financial Instruments Directive” (Mifid 2), when implemented (it is currently behind schedule), will give any firm (including firms in the US or Singapore) with “equivalent regulation to the EU’s” access to the single market for financial services products. This would make the EU banking passport irrelevant for the financial services industry – in theory. In practice, with Mifid 2 as with the passport, national regulators will still manage to ensure they are in control.

Whatever the case, it’s important to bear in mind that not much wealth and not many highly paid jobs are generated by these activities. Pension funds are under pressure to charge as little as possible, and they buy any fund or benefits payment administration in bulk from large providers who charge a low fee on high volume. SIPP providers take an administration charge as well as a small fee for every trade you carry out. It’s a low margin, volume game. The same is true for brokerage accounts, usually minus the admin fees. And these operations are not typically based in the City, but in low cost cities like Glasgow, or regional asset gathering centers. One of the biggest personal investment providers in the UK, Hargreaves Lansdowne, is based in Bristol.

What is heavily concentrated in the City, and earns big fees (and bonuses), is wealth management companies such as family offices and private banks. This is where very wealthy people pay high fees for a personalised wealth management service. Again, this is regulated by the FCA or other domestic regulators, nothing to do with Europe. And as these are wealthy people they are typically nimble in moving their money around from one jurisdiction to the other.

Once the investor’s money is handed over to the heavily regulated customer facing investment company, regulation becomes much less intense. The customer facing company, because it is a professional entity, is able to invest internationally with a great deal of flexibility and without much interference, as we shall see.

Intermediation, step 2: Fund management – this is where it gets interesting, but not for Europe

As you can see there are two types of funds in the top half of the diagram, segregated funds and mutual funds. Segregated funds are bespoke funds (typically pension funds) set up by the fund sponsors for a particular set of investors (typically employees paying into the sponsor company’s pension scheme). There are other less high profile types of segregated funds that I didn’t put on the diagram for the sake of simplicity; these include insurance funds (e.g. Aviva life insurance), sovereign wealth funds (e.g. Government of Singapore Investment Corporation), trade union funds, university endowments (e.g. Harvard), charitable funds (e.g. Wellcome Trust) and central bank reserve funds (e.g. Hong Kong Monetary Authority). Mutual funds, by contrast, are wholesale or “off the shelf,” rather than bespoke, and open to any investor as long as they meet the fund’s eligibility criteria (money laundering check, minimum investment amount etc.).

It is crucial to note the following fact: these segregated funds and mutual funds are independent entities in their own right. I made a point in the diagram above of separating the fund companies (segregated or mutual) – through which the investor’s money is handled – from the “fund managers” who manage that money (and are highlighted in red font on blue background). This made the diagram more complicated, but was necessary in order to emphasise this important distinction.

Segregated funds (and any sub-funds within them) are set up and administered by the fund sponsors, but independent from those sponsors. They have their own board of trustees, for example, who are there to prevent the fund sponsors from doing anything which might jeopardise the fund’s ability to meet its obligations. As for mutual funds, although most are set up by the fund management companies that manage them, they are nonetheless independent from those fund management companies. Offshore funds such as Cayman Island funds have very little regulation, which is partly why Bernard Madoff was able to run his pyramid scheme in one of them. However onshore funds such as UK unit trusts or UCITS funds (which are crucial to the Brexit debate) insist that the fund company be solidly independent to avoid such risks. Nearly all onshore funds, by law, have their own custodians, who hold all the assets including cash on the fund’s behalf (the charge for this typically varies from one to five basis points or 0.01-0.05% per annum); administrators who value the fund on a daily basis and calculate the value of each investor’s share in it, particularly when the investor adds or withdraws money (this service typically costs 5-10 basis points or 0.05-0.10% per annum); and independent directors who defend the investors’ interests and oversee the fund manager (typically paid £5k-£50k per annum).

These independent (segregated or mutual) fund companies almost invariably entrust the active management of their assets to third party fund management companies (the exceptions are some segregated funds which manage part or all of their assets in house; the Canadian public pension funds are leaders in such in-sourced management). So the fund management companies (the part in red font on blue background in the diagram) are paid a fee by the (segregated or mutual) fund company to manage the assets in that fund. This fee typically varies from 25 basis points (0.25%) per annum for very large pension funds to up to 2% plus 20% performance fee for hedge funds. In other words, this is where the big money is made, in the fund management company, not the fund company itself. In summary, the investor’s funds are held in the fund company. But how those funds are invested is typically decided by the fund management company appointed by the fund company. The independence of funds, particularly of the mutual fund from the fund management company that manages it, is crucial when it comes to assessing Brexit’s impact on the City.

And it is on this point that TheCityUK is highly misleading. It suggests that being part of the EU somehow facilitates the City’s management of “a European fund” (all quotes taken from the “Practitioner’s Guide” pps 6-7):

This is clearly not the case with segregated funds. There is no need to set up a “local office” to manage a segregated fund because the segregated fund has already been set up by the fund sponsor to handle the investors’ money. Once it has been duly established, that segregated fund can appoint who it likes as fund manager. In practice it may take a very cautious approach to avoid reputational risk. Typically the pension scheme will have rules to say it will only select managers who are authorised and overseen by a (national) regulatory body, but that is their choice. Nothing to do with Europe. You can have a Swedish pension fund which employs a US manager, authorised by the SEC, to manage a segregated US corporate bond portfolio on its behalf, or a German pension fund which employs a Chinese manager, authorised by the Singapore monetary authority, to manage a Chinese equity portfolio on its behalf. Large parts of the UK fund management industry manages segregated mandates for US endowments, Middle Eastern sovereign wealth funds and Asian monetary authorities’ reserve funds without any of the countries concerned being part of the EU. This is totally international and has nothing to do with EU regulation or trade deals. None of this can change post Brexit.

As for mutual funds, they – as independent entities – are subject to regulations which are totally different from those which apply to the fund management companies that manage the assets in them. Fund managers only need to be authorised by their domestic regulator, but the fund companies need to be authorised in any region in which they are available for sale. In practice, you can find a US fund manager, based in New York and authorised by the SEC, who manages a UK unit trust, a Luxembourg UCITS fund and a US mutual fund. The US mutual fund and fund manager are authorised in the US (though sometimes by multiple and different entities), the UCITS fund is authorised in Luxembourg and the UK unit trust is authorised in the UK.

UCITS: not so much a Brexit risk for the City as a Trojan horse into Europe

Most mutual funds, such as UK unit trusts, used to only be sold in domestic markets and were accordingly regulated by a domestic regulator. However the UCITS – or “Undertaking for Collective Investment in Transferable Securities” – directives are a set of European directives that allow collective investment schemes (i.e. mutual funds) to operate freely throughout the EU on the basis of a single authorisation in one EU member state. In practice, most of the growth in mutual funds in Europe, including those managed in the City, is in UCITS funds. The risk would be that post Brexit the City would no longer be able to offer or manage UCITS funds. This risk is highlighted by many, including the UK’s former EU commissioner Jonathan Hill, the Center for European Policy Research (CEPR) and TheCityUK:

However looking at the UCITS legislation in detail you find that these august bodies and individuals don’t really understand UCITS. The UK will indeed no longer be able to issue UCITS funds post Brexit. However, in practice, hardly any UCITS funds were ever issued in the UK in the first place! The City’s business is managing UCITS funds, not issuing them. The vast majority of UCITS funds are issued in Dublin and Luxembourg, where they are approved by the Central Bank of Ireland (CBI) and Banque Centrale du Luxembourg (BCL). Large industries have sprung up in these two jurisdictions to support the growth of UCITS funds. The main income generated due to UCITS in Dublin and Luxembourg consists of the costs (mainly legal fees) for setting the funds up (typically £10,000-£50,000 per fund) which are charged to the fund, typically over five years. It is in this activity that the UK might be prevented from participating post Brexit, but it is a small activity and as previously stated one from which the City hardly derives any revenue. The crucial point is that virtually all the UCITS funds managed in the City are issued in Dublin and Luxembourg, which remain part of the EU. As long as the funds managed and generating important fees in the City are approved by the CBI or the BCL and meet the criteria for UCITS, they will continue to be available to investors throughout Europe based on existing European legislation.

So what are the criteria for UCITS, and can any of them prevent the City from managing UCITS funds post Brexit? For a fund to qualify as UCITS a number of conditions are required:

A prospectus approved by the authorising member state’s central bank;
A well established investment and risk management policy clearly stated in that prospectus;
Limitations on total portfolio risk and position sizes;
Independent Board of Directors, Custodian and Fund Administrator;
Minimum capital requirement for the management company;
Regular liquidity.

If you read this carefully, none of these rules require the manager of the UCITS fund to be authorised in an EU member state. For the central bank to approve the prospectus you need, in practice, to be authorised by a competent authority. But nowhere in either central banks’ rule book is there any rule specifying that the manager of a UCITS fund must be authorised in an EU member state. The BCI’s rule book is clearly written and it is easy to see that it contains no such provision. In practice, you can have a Luxembourg authorised Asian equities UCITS fund managed by a Hong Kong Monetary Authority authorised fund manager.

If the EU try to change the rules to make it obligatory for managers of UCITS funds to be based in the EU, so as to spitefully prevent City fund managers from managing such funds, they will also have to ban New York, Hong Kong, Melbourne, San Francisco … or else be in contempt of the WTO. Moreover these funds belong to investors. If the EU butts in and prevents the company managing the fund from managing it they would be violating those investors’ rights. The EU would face lawsuits of gigantic proportions which it would lose. Given the parlous state of EU pensions, this is a particularly explosive area for the EU to play games with.

Bottom line: post Brexit, City fund managers can continue to manage segregated and mutual funds as they did before. And they can continue – under existing regulations – to manage Luxembourg or Dublin authorised UCITS funds which will be available to investors throughout Europe. There is nothing the EU can do about this.

To buy their assets fund managers typically go through brokers, unless they are buying unlisted assets such as real estate, private equity or infrastructure (which are often sold through agents or corporate bankers). The brokers typically publish research and bring companies to visit the fund managers to justify their (currently shrinking) commissions. In addition to entering orders for customers onto the exchange, or with inter-dealer-brokers (IDBs) for products such as government bonds which are traded over the counter (OTC), brokers will make a market in certain assets, offering to buy them at the bid price or sell them at the offer price, making a spread between the two in exchange for providing liquidity.

TheCityUK highlights a risk to this activity on page 8 of its Practitioners Guide, as does University of Chicago economist Anil Kayshap in “The U.K. Can’t Block Immigration If It Wants To Keep Its Finance Industry,” but again both are very vague regarding how exactly the City would be affected. I don’t think either really understands how markets work. Anyone who is authorised as a fund manager is judged to be able to look after themselves and choose which broker they use. The FCA and other regulators should and do investigate the brokerage firms to make sure they are not up to some skullduggery, such as engaging in insider trading or rigging LIBOR. But the regulator’s aim here is to protect investors, not to tell fund managers in which city their brokers are allowed to operate. In fact, any restrictions regarding which brokers a fund manager can use are token and easy to comply with. In practice, you have French fund managers buying Russian equities through JP Morgan’s Moscow equities desk for their global fund (which may be a Dublin authorised UCITS fund), and the same French fund manager buying a Kazakhstan mining stock through UBS’s London equities desk for the same fund. If a Dutch pension fund wants to buy French government bonds OTC, it may call a broker in London, who happens to have them on offer; if it wants to sell Canadian government bonds OTC, it may call a broker in New York, who happens to have a large bid.

Remember, any trade basically involves an investor (call her Investor A) who owns an asset (call it asset X) and another investor who wants to buy that asset from her (call him Investor B). Asset X is Investor A’s property. It’s her decision whether to sell it – or not. And it’s Investor B’s money. It’s his decision whether to spend it on Asset X – or not. It’s a private transaction. Between two professional investors. The EU cannot tell them what to do with that asset. Or where they carry out their trade.

Bottom line: This is a totally international market where people trade what they want where they find the liquidity. Period. Nothing to do with Europe or any trade deals. Any regulation is there to protect the fund manager and her clients, not to prevent her from using brokers in any particular location. In practice, brokers tend to cluster close to their customers, the fund managers, and this will continue to play into London’s hands post Brexit.

Intermediation, step 4: Exchanges and IDBs – private companies, totally international, can trade what they want with whom they want

Stock exchanges and IDBs are basically utilities which charge a small fee to allow trades to be matched. They are privately owned and make decent profits for their owners. And those owners are spread throughout the world: most Deutsche Börse shareholders are also LSE shareholders, and a large percentage of them are neither based in the UK nor in Germany. But the LSE and other exchanges don’t employ that many people nor contribute that much to the economies of the countries in which they are nominally based. However a lot of the vague threats made about the City seem to concern these private utilities. Anil Kashyan writes: “swap contracts that are denominated in euros are a trillion-dollar market, and most of that business is now centered in London. French President Francois Hollande has said that this activity should be moved back into the EU.”

It is one of the most ridiculous aspects of the debate regarding the impact of Brexit on the City that people taking part in it assume that governments decide on what exchange (or with which IDB) any financial instrument is traded. Since when has this ever been the case? Can anyone name one exchange or IDB in Europe which was set up by a government? Imagine a five year Euro Swap paying a fixed rate in exchange for receiving 3 month euribor. Most Swaps are not even traded on exchanges but OTC, like bonds and currencies. To trade OTC you basically need a phone, a computer and a list of clients. Now imagine an IDB in London offers a market in such a 5 year Euro Swap. Some brokers buy it on behalf of their clients, who thereby agree to receive the fixed rate and pay the floating rate (3 month euribor), some brokers sell it on behalf of their clients, who agree to pay the fixed rate and receive 3 month euribor. If investors decide to trade those Swaps in London, what on earth is François Hollande going to do about it? Cough, tap them on the shoulder and say “mes amis, you must not do zis in Londres”? This is global finance, not some 80s sitcom. The Swap is a bilateral contract between two parties taking different views on interest rates. Those parties can take these views with any IDB or exchange in any city they want. The only things those parties care about are liquidity, price integrity, speed of execution, counterparty risk, the legal status of their contract (UK contract legislation is prized throughout the world) and regulation (the EU’s approach to regulation is loathed by traders throughout the world). What François Hollande or any other European politician may think doesn’t even make the list.

Turning to equities, if the French fund manager we discussed above wants to buy a Russian stock he may be able to buy it on the Moscow stock exchange or the LSE; often they are dual listed. It’s up to him where he buys his stock, up to the company where it lists its stock, and up to the exchange whom it admits for listing. These are private companies, as the merger of Deutsche Börse and LSE post Brexit and the merger of the Nordic OMX with Nasdaq many moons ago eloquently demonstrated. Often you get many exchanges competing for liquidity in the same stock – Nokia for example is actively traded in the US, Finland, Sweden and Germany. Unilever is quoted in London and in Amsterdam. Signet is quoted in London and New York. Shares of the Italian fashion house Prada are exclusively traded in Hong Kong!

If Prada can be quoted and traded in Hong Kong, how on earth is the EU going to stop anyone trading anything in London? Who do you think you’re kidding Mr Junker?

Bottom line: anyone who wants to and is authorised by an exchange or an IDB can trade there if they’re an investor and be traded there if they’re an issuer. It’s the exchange or the IDB’s exclusive decision. No trade deals needed. The EU has absolutely no say in any of this. Never had before Brexit. Never will after Brexit.

Corporate finance and proprietary trading

To round out the list of activities carried out in the City we need to look at two other activities not directly related to managing financial assets. To satisfy ourselves that we are covering all the bases what better place to look than a list of Goldman Sachs’s activities, taken from their annual report 2015 (page 13). After all, the EU officials, central bank governors, IMF managing directors and other grandees warning about Brexit were to a large extent former Goldman employees.

“Institutional client services” basically means what I prosaically describe as “broking” in the sections above. “Investment management” is what I call “fund management.” So those two are covered.

“Investing and lending” is activity carried out with Goldman Sachs’s own balance sheet. A large part of this is proprietary trading or “prop trading,” where Goldman takes punts on various markets with its own money. There is nothing the EU can do to stop Goldman doing this from London. Japanese and German banks (many of the latter, ironically, owned by the German regional governments or Länder) for example have big prop desks whose ability to lose money on any exchange or OTC market in the world – London, Hong Kong or New York – is legendary. If the exchanges or IDBs in London (or indeed anywhere else) are happy to deal with prop traders anywhere in the world there is nothing the EU can do about it. Remember, it’s Goldman’s money that Goldman is playing with. If Goldman’s prop desk in London thinks it’s a no brainer to go long a five year Euro Swap, and BNP Paribas’ prop desk in New York thinks it’s a clever idea to go short the same Swap, what can the EU possibly do about it?

Goldman’s loans are typically to large companies that can borrow anywhere they like. As long as Goldman as lender approves them and they are not breaching any domestic leverage rules no regulator can stop them. Move on. Nothing to see.

Investment banking, which refer I to as “corporate finance” above, is a more interesting case. Here, a company or government that wants to issue equity or debt will pay Goldman (or its oleaginous competitors such as Citigroup, Merrill Lynch, UBS, JP Morgan etc.) to value the business, produce a prospectus, organise roadshows and place the shares through its own sales force and various other brokers. The issuer may pay an underwriting fee, against which Goldman (or one of its oleaginous competitors) promises to buy any securities which can’t be placed with investors, thus guaranteeing the issuer will raise the funds it needs. Investment banking also comprises giving companies advice (for large fees) on corporate activity such as mergers and acquisitions (M&A), spin-offs, debt restructuring, tax driven corporate inversions and the like.

This is a highly international market in which the customers are big corporates and governments. If Saint-Gobain thinks that JP Morgan’s corporate finance desk in London will get their emergency rights issue away it’s up to Saint-Gobain. If the Italian government thinks UBS’s corporate finance desk in London can get its emergency bond issue away that’s the Italian government’s decision. And, let’s face it, if they’re desperate for cash, a big firm in London will reassure the international investors (who, remember, have to buy the paper they issue) more than any local French or Italian firm!

Brass plaques – circumvent any legislation

Money is in essence immaterial. It can move around the world at the push of a button. The only tangible assets in the City are expensive art work and computers, which can pretty much sit anywhere. Anyone wanting to circumvent any European directive which requires them to operate from an EU jurisdiction can easily conform with that directive by opening an office with a desk and two secretaries. Not that I think they would need to since, as already explained, most if not all of the City’s activities are not EU regulated.

Let’s imagine that there actually was a rule that forced all fund managers, for example a US bond fund management firm like Pimco, who manage funds for EU clients to have an office in the EU. And let’s imagine that Pimco currently has an office in London to meet that requirement. Post Brexit, the UK is no longer in the EU, so Pimco can’t use its office in London to meet the requirement and has to open a new office in the EU. In other words one of the Brexit scare stories comes to pass. What changes? Pimco opens an office in Estonia, with a desk and two pretty Estonian secretaries, and pays €20k in rent. But the fund managers earning big bonuses for managing the fund are still based in Newport Beach, California (as they were when Pimco’s “EU office” was in London). And the profits made from the fund management fees are still being earned by the Pimco LLC in the United States of America (just as they were when Pimco’s “EU office” was in London). The transfer of value from London to Estonia has been two secretary salaries and a €20k rent cheque. In other words the square root of nothing. It would be exactly the same for a fund management firm based in London as it would for Pimco based in Newport Beach. Because finance is international and intangible, the only parts of it that the EU can hope to control are the parts that have no value.

European banking passport – a red herring

The European banking passport allows banks in one member state to offer “banking services” in another member state. Banking services essentially means issuing credit cards, granting loans and mortgages and taking deposits. The sort of thing the TSB or the Co-op Bank do in the UK. The best example of the banking passport in the UK is Sweden’s Handelsbanken, which is growing very rapidly in small business banking. However the City doesn’t really do this, it’s not a big part of its activities. Note that Metro Bank, based in the USA, is growing a retail banking franchise in the UK at a similar rate to Handelsbanken’s SME franchise, despite not enjoying a European passport. If UK banks really, really, want to operate in retail banking in the EU they can easily obtain a banking license in whichever country they choose, just like Metrobank did in the UK.

Euroclear – a risk

Exchanges and IDBs match buyers with sellers instantaneously, and rely on those parties to settle their bargains in good faith, on T+1 or +2 or whatever. Clearing houses facilitate this by guaranteeing the settlement of the trades, so traders can trade without fear of being “welched on,” and in return take a small clearing fee and ask the traders to post collateral. Because many traders will be buying and selling the same securities at any point, a clearing house can “net” these flows off so they are only exposed to a small volume of completion risk at any one time. This enables them to minimise the capital demanded from traders.

LCH Clearnet in London is just such a clearing house, and one of its major activities is clearing Swaps. The fact that this activity may be endangered by Brexit is often alluded to (see FT Alphaville) without really explaining the source of the problem. To understand this issue we need to revisit the Swaps market, described above, and in particular understand the source of the underlying demand for Swaps. The typical user of a Swap is a deposit funded bank that writes a lot of mortgages. Such a bank will typically derive the vast majority of its funding from customer deposits, on which it pays a floating rate (for Eurozone banks this rate tracks euribor). If it writes its mortgages at floating rates then it doesn’t need any Swaps. However many of its customers will want to fix their borrowing costs. Moreover, if its borrowers have variable rate mortgages and floating rates rise those floating rate borrowers’ monthly payments will increase and their ability to service their debts will be impaired, potentially leading to defaults. So banks are often keen for borrowers to fix their mortgages in order to minimise credit risk. But when such banks write fixed rate mortgages which are effectively funded by floating rate deposits, they end up with an interest rate mismatch. If floating rates fall then their margins increase, but if rates rise their margins reduce and, at a certain point, go negative. This is a serious, potentially fatal risk for any bank. Such banks therefore “hedge” this interest rate risk by going into the Swaps market and swapping their borrower’s floating rate into a fixed rate at the current Swap rate – of course after slapping a mark-up onto the fixed mortgage cost they charge their customers (“passing currency from hand to hand …”).

On the other side of the trade is, as described above, an entity that wants to receive a fixed rate and pay a floating rate. This might, in theory, be a bank with an excess of fixed rate deposits, but in practice such entities are rare as hens’ teeth. In reality, the other side of the trade is usually a financial investor who is looking to earn a premium. As the fixed rate is almost invariably above the relevant floating rate, anyone writing a Swap will collect a spread, in other words will earn a positive “carry” as long as floating rates don’t rise too much.

If you take a step back, the Swaps market is very similar to insurance. Those buying the Swap pay to “insure” themselves against rising interest rates. Those writing the Swap are being paid an annual premium to provide that insurance. If floating rates rise it reduces the Swap writers’ income and at a certain point turns it negative, meaning they have to pay out – just as your car insurance company does when you have a crash. Now if you cast your mind back to the last major financial crisis, as described in Michael Lewis’s brilliant The Big Short (2010), you will remember that one of its major contributory factors was just such financial insurance products. And that those products were also a kind of Swap. At the epicenter of the last crisis were sub-prime loans, effectively mortgage loans to borrowers who were too poor to afford the houses they lived in, and which would turn sour if property prices ever stopped going up. Naturally, there was great demand for insurance against defaults on the various classes of sub-prime debt from a number of entities: the banks writing the mortgages, financial institutions to whom those mortgages were repackaged and sold in the form of CDOs, CLOs etc. and, crucially, the heroes of The Big Short who thought the whole thing was a fraud. These entities went into the credit default Swap (“CDS”) market either to hedge their credit risk or (in the case of the heroes of the Big Short) to make money when the house of cards collapsed.

On the other side of that trade were the villains of The Big Short, insurers like AIG and Wall Street brokers like Goldman and Morgan Stanley who thought it was easy money to take juicy premiums against the risk of sub-prime default – a risk they underestimated. When property prices eventually stopped rising and mortgages on variable rates (“ARM”) with two year teaser rates re-set to higher market rates, mortgage defaults exploded and a lot of the CDS “credit insurance policies” were triggered. The problem was that the companies writing the insurance turned out not to have nearly enough capital and were therefore unable to pay; they were caught with their trousers down. There was a domino effect, as Wall Street bank A had bought insurance from Wall Street bank B, but Wall Street bank B couldn’t pay out so Wall Street bank A couldn’t make good on the insurance it had sold to Wall Street bank C, and so on. Two early casualties of this hot mess were Bear Stearns and Lehman Brothers. As Warren Buffet succinctly put it with his usual barbed wit, “when the tide goes out you discover who’s been swimming naked.” The great scandal was that these firms were allowed to make lots of money writing insurance on dodgy sub-prime loans during the boom, and were then bailed out by the Federal Reserve when they weren’t able to pay out on their stupid bets in the bust. The Fed effectively waded out into the sea and handed Wall Street a towel. It makes you weep.

Turning back to the Euro interest rates Swap market, if we ever have a rise in interest rates, the European mortgage bank which used to sleep soundly at night in the knowledge that it swapped (or insured) its interest rate risk doesn’t want to wake up in a cold sweat because the other side of the trade, who wrote the Swap, isn’t going to pay out – just as the Wall Street banks and AIG couldn’t pay out on their credit default Swaps during the sub-prime fiasco. As I explained above, as interest rates rise LCH Clearnet will be demanding more and more capital from the investor who wrote the Swap. If that investor can’t post the collateral then LCH will close the position at a loss for the investor. All its collateral will be used to make good on the “insurance policy” it wrote. But as interest rates rise further that capital will be eaten up.
This is where the ECB starts to get worried that we get a repeat of a scam like the one perpetrated in the sub-prime bubble. It may fear that City investment banks and others will make a lot of money in London writing Swaps in the good times, but not hold enough capital to make good on the insurance they promised if interest rates ever rise. And if the interest rate insurance purchased by European banks doesn’t pay out the ECB will be left holding the baby. The banks with fixed rate mortgages and whose Swap counterparties have defaulted will be hit by rising interest rates and/or increased defaults. This could rapidly make those banks insolvent. Any other bank with exposure to such banks will be at risk and seek to withdraw its deposits. But, just like last time, no one will really know who is at risk, everyone will deny everything, the rumor mill will go into overdrive and confidence will evaporate. You could easily have a domino effect similar to the one which brought the financial system down in 2008, leading to another run on the banks. The ECB might end up in the ignominious position of having to bail LCH out to stop the European banking system from collapsing. Like Wall Street in 2008, the London banks would have made money in the boom and been bailed out (by the ECB) in the bust.

This is far from being a theoretical risk. The parallels between the current interest rate situation and the housing boom that preceded the 2008 crash are frankly spooky. Central bank interest rates and government bond yields have been steadily declining since the 2008 crash to the point of being negative in real terms in many countries; such low rates have no historical precedent. Financial leverage in the housing market and house price (un)affordability reached similarly unprecedented levels before the last crash. The one way direction in which interest rates have moved has left large parts of the financial industry totally unprepared for and vulnerable to a rise in interest rates, just as the one way rise in property prices did in the 2008 crash. So you can understand why the ECB might be worried.

Because of these risks, European banks may be reluctant to trust a Swaps clearing house that is not backed by the ECB. So for LCH Clearnet to continue to clear Swaps post Brexit it may have to be regulated by the ECB and in particular require leverage ratios from its clients and implement collateral policies which reassure the ECB that the investment banks playing in the Swaps market are not taking the piss in the way Wall Street did during the sub-prime debacle. In fact, LCH is already regulated by numerous European regulators, including France’s Autorité de Contrôle Prudentiel (the same one that regulates IG!). LCH could of course open an office in Frankfurt in which all its regulatory, client approval, risk assessment and collateral management functions were performed. This would allow the IT and sales functions to stay in London. But the ECB may insist that everything moves out of London. It’s a hard one to call.
All that said, this is a relatively small part of the wealth generated by the City and the impact would not be significant. The important point is that there is no read across from Swaps clearing to the rest of the City’s activities. The robustness of Euro denominated Swaps clearing is important for the solvency of the European banking system. ECB support is therefore likely to be demanded by the Swaps customers. None of this applies to the City’s other activities.

“But why are the banks warning about job losses?”

Many of the City’s activites are under immense pressure, and have been long before Brexit:

There is much less money to be made in prop trading with volatility at low levels. What’s the point of taking a punt on an asset when the central banks are dictating its price?
The blow up of Lehman rightly encouraged regulators to force banks to hold much more equity against those (currently less profitable) prop trading activities, making them even more burdensome to maintain.
Brokerage fees are under relentless pressure. Fund managers used to cover the costs of the broker research they used with the commissions they paid to those brokers for trading stocks. Effectively the client was paying for research the fund manager was using to do the job … for which it was already charging the client a fat fee. New standards limit this, forcing fund managers to scrutinise the amount they pay for research and putting pressure on brokerage fees.
More and more funds are passive funds that mirror indices and only trade when there is a change in the index they track. These passive funds accordingly trade less often than active funds, and they also comprise an increasing proportion of the market, all of which is reducing trading volumes.
Fund management fees are under pressure due to having been too high to begin with, the poor performance of many fund managers against the indices they are supposed to beat and competition from low margin passive funds which track those indices.
Just look at the share prices of Barclays or Deutsche Bank if you don’t believe me. Admitting this is of course somewhat humiliating for the investment banks’ big headed CEOs. Brexit provides them with a convenient way to shrink without admitting failure.

The Upside – Leck mi am Arsch!

The much lamented Holy Roman Empire of the German Nation (800-1806 AD) was a loose collection of independent states and city states. It was a model of the kind of minimalist federation which might have actually worked for the EU, rather than the centralising, maximalist model (based, it seems to me, on the French Revolution) which has made the EU fail. One of those independent city states, a town in the west of that former Empire, has at its entrance a tower referred to as the “Leck mi am Arsch” or “kiss my ass” tower. That independent town was, for centuries, open to all sorts of people who were persecuted in nearby France and elsewhere in the Empire, such as Jews (the town’s synagogue survived WWII), Protestants or Freemasons. As they walked under the tower they could turn to any of their persecutors who were in hot pursuit, and proffer the words for which the tower is famous without any fear of retribution. I love that.

Europe’s attempts at uniformisation have progressively eliminated such places of refuge. And Europe, with its attacks on bonuses, its desire to impose a transaction or Tobin tax and its other meddling attempts at micro-management – which encouraged people to vote Brexit in the first place – is giving more and more businesses, particularly in finance, the wish to flee to a place of refuge. London post Brexit will be such a place. A place where bankers, hedge fund managers, traders and all sorts of wealthy people fed up with the EU’s meddling will be delighted to find sanctuary. A place where they can safely turn around and say to the EU: Leck mi am Arsch._________________--
'Suppression of truth, human spirit and the holy chord of justice never works long-term. Something the suppressors never get.' David Southwell
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Martin Van Creveld: Let me quote General Moshe Dayan: "Israel must be like a mad dog, too dangerous to bother."
Martin Van Creveld: I'll quote Henry Kissinger: "In campaigns like this the antiterror forces lose, because they don't win, and the rebels win by not losing."

Negotiations on our exit from the EU have begun, and Theresa May is still sticking to her Brexit guns. And that means everything is up for grabs -- including dropping strict EU standards on what goes in our food -- in the rush to secure trade deals with countries outside of Europe.

It’s a nightmare scenario. UK trade secretary Liam Fox is kicking off trade talks with the US today, and says he’s open to putting chlorine-washed chicken and hormone-pumped meat on our supermarket shelves to secure a deal.

We know that big supermarkets like Waitrose don’t want to see this any more than we do -- endless confusion about standards will only make their jobs harder.

So let’s use our voices to get supermarkets to speak out and commit to not putting lower standard food on the shelves. This is our chance to stop Brexit UK being a corporate free for all.

Tell Waitrose to commit to maintaining EU standards of food and animal welfare in all products it sells after Brexit.

Theresa May’s hard Brexit means we’re facing a double whammy of jettisoning EU standards and striking a quick trade deal with the US. This opens the door to cheap imports made under US factory farm conditions and grown with 82 pesticides banned in EU. Just last week, a new report warned that the government is sleepwalking into a post-Brexit future of insecure, unsafe and increasingly expensive food supplies.

But it doesn’t have to be that way. Supermarkets might be the only thing standing between us and lower quality food and farm animal welfare standards.

Now is the time to push -- we know Waitrose is proud of its commitment to food that’s sustainable and ethically sourced, and from farms with high animal welfare standards. It stakes its reputation on those values and has invested in supporting UK farmers to work to the highest standards.

Waitrose: commit to not selling food that wouldn’t meet EU standards after Brexit.

UK Farmers are worried that they won’t be able to compete with the cheap factory farmed produce that could flood the market with a US trade deal and will go out of business. Consumers have fought too hard, and for too long, to see our food safety and animal welfare standards go up in smoke!

Supermarkets care what we think. When tens of thousands of SumOfUs members took action, Sainsbury’s dropped krill oil from its shelves. The supplement is made from the cornerstone of the Antarctic food chain that marine creatures like whales rely on for survival.

So let’s make Waitrose speak out -- in favour of keeping some of the highest standards in the world when it comes to what goes into our food, and how farm animals are treated. For the sake of our health, our environment, our farm animals and our farmers.

Waitrose: commit to maintaining EU standards of food and animal welfare in all products you sell after Brexit.

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